How to compare homeowners insurance quotes
Your home is one of the biggest investments you'll ever make. As insurance geeks, we've pinpointed the key factors that you should consider when choosing an insurer.
Get all your personal information in front of you
These days, many home insurance companies can quickly provide you with online quotes. However, the rates you see will only be as accurate as the information you submit in the application process. If you want to see home insurance quotes that you can rely on, you'll need to make sure of the following details. Each of them may have an impact on your quotes.
- Total square footage
- Renovation history
- Secondary structures like garages and sheds
- Estimated total value of your belongings
- Amount of high-value items like jewelry
- Breed of dogs you own
- Current home insurer, if any
- Number of recent claims made
Understand the coverage you're buying
Coverage essentially refers to the amount of protection that your policy provides. More coverage means more protection — and a more expensive quote. However, it's also important to note that home insurance policies contain several different types of coverage that each apply to different things:
- Dwelling coverage for the structure of your house
- Personal property coverage for your belongings
- Liability coverage for property damage or injury to others
- Additional living expense (ALE) coverage for extra expenses when your home is uninhabitable
All of these protections come standard in the most common home insurance policy, known as an HO-3. If you have a mortgage, your lender will require a certain minimum of dwelling coverage to protect the house. Otherwise, you have the option to adjust these coverages to fit your needs.
Collect and compare home insurance quotes
Once you've got your personal details and a good picture of your coverage needs, you're ready to start requesting quotes from insurance companies. We recommend starting with the providers that we've identified as the best in terms of service quality, benefits and affordability. If you'd like to know what the baseline cost of coverage is, we also keep tabs on the average cost of homeowners insurance.
Master the details of your home insurance policy
If you've ever had a question about how home insurance works, our experts have probably explored the answer in one of our detailed guides.
Standard homeowners insurance provides coverage in three major areas: your physical home, the belongings inside and your personal liability to third parties. These areas are covered against damage from causes like fire, wind and theft. Read more
When your house or belongings suffer damage that's caused by a peril — such as fire, wind or theft — that's covered by your policy, you can file a claim requesting your home insurance company pay for the costs of making you whole. The insurer then begins the process of verifying and paying your claim. Read more
If you currently have a mortgage balance, your lender probably requires that you carry homeowners insurance to protect your property. Even though there's no legal requirement for homeowners to have insurance, the lender requirement means that most people do need an active policy. Read more
The "best" homeowners insurance policy is one that provides enough coverage to protect the full value of your home and assets at a monthly rate that you can afford. Finding the best policy also requires you to understand whether you face any risks that aren't covered by standard insurance — like flooding. Read more
Find out how much home insurance rates increase — and why
The cost of homeowners insurance has risen considerably in recent years. In 2010, the National Association of Insurance Commissioners (NAIC) reported an average annual cost of $909 for homeowners insurance. As of 2020, we estimate that the average cost is $1,445 — a total increase of 59% over the last decade.
With sustained growth in property values across the country as well as an increase in the impact of natural disasters like hurricanes and wildfire, the growing demand for homeowners insurance is likely to continue driving rates upward.
Which states are most likely to see higher home insurance rates in 2020?
Each year, states require insurance companies to submit a rate filing that describes how they plan to adjust their rates in the next year. According to rate filings from the past five years, 31 states have seen home insurance rates outpace the cumulative rate of inflation (9.14%). The states with the greatest increase in rate filings for 2020 include California, Nebraska and Illinois.
Rate change (2019-2020)
Industry Loss Ratio (2014-2018)
To understand why rate increases are especially high in certain states, we look to a measure called the loss ratio. The annual loss ratio of an insurance company is equal to the claims paid out divided by the premiums collected. This makes loss ratio an inverse measure of an insurer's profitability. A loss ratio over 100% means that an insurer paid out more than it earned.
Insurance companies often seek to compensate for an increase in their loss ratios by raising the rates they charge for coverage.
In states where insurers post very high loss ratios, rates tend to increase significantly in the following years. For instance, California's devastating Camp Fire in 2018 led to $16.5 billion in wildfire damages. As a result, the state's insurance industry experienced a loss ratio well over 100%, and their rate filings for 2020 reflected the most aggressive increases in the country.
Rate filings also reflect the rising cost of construction. Because homeowners insurance covers the cost of rebuilding or repairing residential structures, insurer rates are influenced by increases in the local price of materials and labor. Where states have experienced severe disasters and a spike in construction demand, shortages can lead to insurers raising their rates.
How to control your homeowners insurance costs
If your home insurer raises your rates year after year, there are plenty of competitors willing to offer you a quote to switch providers. So long as you aren't compromising on the amount and quality of coverage, switching insurers is one of the most effective ways to control your costs. While you may miss out on your old insurer's loyalty discount, providers often offer discounts for new customers too.
If you have a bundled policy that you want to keep, another option is to raise your home insurance deductible. While this means you're on the hook for a bigger share of the upfront costs in any claim situation, accepting a higher deductible should lead directly to lower premiums.
What if my old insurer won't renew my policy?
Sometimes an insurer will inform you that your home insurance policy will not be renewed. Depending on the reason, your options for finding an affordable alternative will vary. If you've been canceled because your property has an unusual risk factor — an old roof, for example — addressing that issue may open a path to renewal with your old provider.
Finding cheap coverage gets much harder if insurers think you live in an area that's at high risk of a wildfire or other natural disaster. In such instances, we recommend looking to either your state's FAIR plan options or an assigned risk provider. While it's likely that these options will cost more than your old insurance, those costs are still preferable to rebuilding your entire house out of pocket.
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