How to Choose a Home Insurance Company

Quick Answer: To choose a home insurance company, compare coverage options, get multiple quotes, check third-party ratings from organizations like J.D. Power, review your location’s specific risks, and evaluate discounts based on your home’s features. The average annual homeowners insurance premium in the U.S. is $2,181 according to Bankrate’s 2025 analysis, though rates vary significantly by state, coverage level, and insurer.

If you own a home, it’s critical to have a homeowners insurance policy to protect it. Homeowners insurance not only offers financial protection for your home and its contents, but it offers financial protection for liability cases, in the event someone suffers a personal injury or damage to their property while on your property. According to the Insurance Information Institute (III), approximately 93% of homeowners carry homeowners insurance, yet many are underinsured relative to the true replacement cost of their home. Choosing the right insurance company and coverage can be an overwhelming task. Here’s what you need to know about how to choose a home insurance company.

What is home insurance?

Your home is likely the most expensive purchase you’ll make. You want to protect your investment the best you can, and choosing a good insurance plan through a reputable home insurance company is the first step.

Like auto insurance, you can choose from a variety of plans to fit your needs and budget. Home insurance policies start with basic plans that cover basic disasters, such as fire, lighting, explosions or falling objects. More comprehensive plans can extend to other dwellings on the property and cover a wider range of types of damage and losses. The Insurance Information Institute outlines eight standard policy forms (HO-1 through HO-8), with the HO-3 being the most commonly purchased form for single-family homes.

You can choose how certain valuables are covered, such as jewelry, artwork, firearms, or money that’s kept at home. Most insurance companies give homeowners the option to choose either the item’s actual cash value (ACV), or the replacement cost value (RCV) of the items. Understanding the difference between ACV and RCV is critical — ACV accounts for depreciation, while RCV pays what it would actually cost to replace the item new. For expensive jewelry pieces, many people opt to carry a separate jewelry insurance policy in addition to their home insurance policy.

Most homeowners choose middle-of-the-road plans, while some choose more comprehensive plans, especially those who are at risk for substantial loss due to their location or other mitigating circumstances. Those with higher-valued homes and high-priced belongings, typically want better coverage that will help them recoup the full value of their property.

Steps for choosing a home insurance company

Policy rates will vary from state-to-state, city-to-city, and from one company to another. Here’s what you should know when researching home insurance companies in your area so you can make the best decision when it comes to who will be insuring your home and personal property.

1. Location

The state, city and zip code of your home will play a big role in the type of coverage you need. Research your area well so you are better informed on the type of coverage you need. The type of coverage will depend on the types of losses that are common for the location. Your state’s department of insurance — for example, the California Department of Insurance or the New York Department of Financial Services — can be a valuable resource for understanding what coverage is required or recommended in your area. Common types of losses that impact policy coverage and rates may include:

Crime rate Certain locations have higher crime rates than others. Higher crime rates, such as break-ins, property theft, and vandalism may have higher insurance premium rates, due to these issues. If your home is in a location that’s at a greater risk for crime, choosing the appropriate coverage plan to protect you in the event of a theft or property damage, is important. You should also consider installing a good alarm system. Most insurance companies offer a discount for functioning home security systems. According to SafeWise’s insurance impact analysis, homeowners with professionally monitored alarm systems save an average of $168 per year on their premiums.

Weather and natural disasters Certain locations are more prone to harsh weather conditions than others, such as hurricanes, tornadoes, flooding, hail, fire, and high winds. Insurance premiums are typically higher in areas where there is a higher risk of property damage due to harsh weather. The Federal Emergency Management Agency (FEMA) administers the National Flood Insurance Program (NFIP), and many standard homeowners policies exclude flood damage entirely — making separate flood coverage essential in high-risk zones. Many companies require you to carry flood insurance on homes close to lakes, rivers, or other types of possible flooding events.

Are you close to a fire station?

Did you know that your location in reference to a fire station can impact your premium? It’s true that insurance companies will give homeowners a discount if you live within a mile radius of a fire station. Insurers use ISO’s Public Protection Classification (PPC) ratings to score fire protection levels in communities — a rating that directly influences what you pay. Close proximity is an added protection for the homeowner’s home and belongings, which lessens the risk of greater loss for home insurance companies.

2. Your home’s features

Home insurance companies consider the features of every home they insure and offer discounts for anything that mitigates an increased risk of a payout on their end. Before you shop around for insurance companies, it will help to make a list of your home’s features and look for companies that will honor discounts for them. Some common features that home insurance companies look for include:

– New construction homes often get lower premiums than older homes. New construction is considered to have all the newest materials and built up to code, while older homes may need updates to meet certain requirements.

– A fully operating and monitored security/alarm system always ensures a reduction in premium costs.

– Home safety features, such as deadbolt safety locks, reinforced windows, and a new, soundly structured roof.

– Smart devices can add extra safety measures. Video doorbells and smart locks and window sensors are common smart devices used in homes today. Companies like State Farm and Allstate offer documented discounts for smart home device integration.

– Fire safety features can include fire-resistant materials, sprinkler system, multiple fire extinguishers, and smoke and CO2 detectors.

– Green home discounts are offered to those who have environmentally friendly features in their home, like Energy Star-rated appliances or solar panels. If your home is a LEED-certified home, this could lower your premium.

– A non-smoker home may get a discount in their premium. Homeowners that smoke, especially inside their home, are at a greater risk for fire damage, which means there’s a greater risk the home insurance company may have to pay out.

3. Third-party ratings

Before you decide on a company, compare the ratings of a variety of companies. Third-party companies, like J.D. Power, compare insurance companies based on their performance. They gather information for consumers regarding premium costs, how efficient and friendly agents are, how they handle claims, and overall customer satisfaction. In J.D. Power’s most recent U.S. Home Insurance Study, Erie Insurance and Amica Mutual consistently ranked among the top performers for customer satisfaction. Additionally, AM Best provides financial strength ratings for insurers — an important indicator of a company’s ability to pay claims. The National Association of Insurance Commissioners (NAIC) also publishes complaint ratio data, which shows how frequently customers file complaints against a given insurer relative to its market share. Checking all three sources — J.D. Power, AM Best, and the NAIC complaint index — gives you a comprehensive picture of any insurer’s performance and reliability.

4. Quote comparison

Lastly, document each quote you get from each home insurance company, based on all the info you’ve gathered and submitted to them, and compare the coverage each company offers, with the premium quotes. Ultimately you want the best coverage for the best premium rate you can get. Tools like Policygenius allow you to compare quotes from multiple insurers side by side, and resources from NerdWallet can help you understand exactly what each coverage component means before you commit. When comparing quotes, make sure each quote reflects the same dwelling coverage limit, deductible amount, and liability threshold — otherwise you won’t be making an apples-to-apples comparison.

Home Insurance Cost Comparison by Coverage Type and Feature

Frequently Asked Questions

How much does homeowners insurance cost per month?

The average homeowners insurance costs approximately $182 per month (or $2,181 annually) for a policy with $300,000 in dwelling coverage, according to Bankrate’s 2025 analysis. Your actual rate will depend on your location, home’s age and features, coverage limits, deductible, and the insurer you choose.

What does a standard homeowners insurance policy cover?

A standard HO-3 homeowners insurance policy typically covers your dwelling structure, other structures on the property, personal belongings, loss of use (additional living expenses), personal liability, and medical payments to others. It does not typically cover flood damage, earthquakes, or routine wear and tear. The Insurance Information Institute provides a full breakdown of standard policy components.

How many home insurance quotes should I get before deciding?

You should get at least three to five quotes before selecting a home insurer. The Consumer Financial Protection Bureau (CFPB) recommends comparing multiple quotes to ensure you’re not overpaying. Make sure each quote uses the same coverage limits, deductible, and liability amounts so you can make an accurate comparison.

What is the difference between actual cash value and replacement cost value?

Actual cash value (ACV) pays you what your damaged or stolen property was worth at the time of the loss — factoring in depreciation. Replacement cost value (RCV) pays what it would cost to replace the item new, without deducting for depreciation. RCV policies typically cost 10–15% more in premium but provide significantly better financial protection. Most financial experts recommend opting for RCV coverage whenever possible.

Does my credit score affect my home insurance rate?

Yes. In most states, insurers use a credit-based insurance score — which draws on data similar to your FICO Score — to help determine your premium. Homeowners with poor credit can pay significantly more than those with excellent credit. According to NerdWallet’s credit and insurance research, homeowners with poor credit pay an average of 76% more for home insurance than those with good credit. Note that California, Maryland, and Massachusetts prohibit the use of credit scores in homeowners insurance pricing.

What discounts are available for homeowners insurance?

Common homeowners insurance discounts include: bundling home and auto policies (5–25% off), installing a monitored security system (up to 20% off), new construction homes (10–25% off), living near a fire station (up to 10% off), non-smoker household, LEED-certified green home, loyalty discounts for long-term customers, and claims-free history. Availability varies by insurer — always ask your agent for a full list of available discounts.

What is the NAIC and how can it help me choose an insurer?

The National Association of Insurance Commissioners (NAIC) is a U.S. regulatory body that publishes a complaint ratio index for insurance companies. A ratio below 1.0 indicates fewer complaints than the industry average — a positive sign. Checking an insurer’s NAIC complaint score is a free and reliable way to assess how well a company handles customer service and claims disputes before you commit.

Is flood insurance included in standard homeowners insurance?

No. Standard homeowners insurance policies do not cover flood damage. Flood insurance must be purchased separately, either through the federal government’s National Flood Insurance Program (NFIP) administered by FEMA, or through private flood insurers. The average NFIP flood insurance policy costs approximately $739 per year, though private market options may be priced differently depending on your flood zone risk level.

How do I compare home insurance companies objectively?

Use a three-source approach: check J.D. Power for customer satisfaction rankings, AM Best for financial strength ratings (look for A- or higher), and the NAIC complaint index for complaint ratios. Then compare at least three to five premium quotes for identical coverage. This approach ensures you’re evaluating both price competitiveness and service quality.

What home features can lower my insurance premium?

Features that commonly lower home insurance premiums include: a new or recently replaced roof, a monitored alarm system, deadbolt locks and reinforced windows, smart home devices (video doorbells, smart locks), fire sprinklers and smoke detectors, fire-resistant building materials, LEED certification or Energy Star appliances, and location within one mile of a fire station. Documenting these features before getting quotes can help ensure you receive all applicable discounts.