Homeowners Insurance Buying Guide

Pricing for the coverage of your dwelling—a major portion of your homeowners policy—is based on the cost to repair your home if it’s damaged or to rebuild it if it’s destroyed. Contrary to what some may think, home insurance premiums aren’t related to home prices, so the real estate inflation that many areas have experienced in recent years won’t affect home insurance costs. But several other recent trends could have an impact.

• Inflation in Costs for Building Materials and Labor 

Inflation has sharply driven up building costs. According to the Bureau of Labor Statistics, between June 2019 and June 2024, labor for construction trade services rose 40 percent, and the cost of construction materials increased by about the same amount. Those higher costs are reflected in policy prices.

• Natural Disasters

At the same time, the growing number and intensity of natural disasters, including wildfires, hurricanes, and floods, are causing more property damage and insurance rates to increase. Last year alone, the National Oceanic and Atmospheric Administration says there were 28 weather disasters causing at least $1 billion in insured losses, totaling $93 billion and resulting in almost 500 deaths. That’s up from 5 in 2000.  

Regulators, scientists, industry experts, and consumer advocates agree that climate change—warming oceans, longer droughts, higher inland temperatures, and excessive rain, hail, and snow—is the culprit.

“So even if you’re not in a disaster-prone region, or you’ve not experienced a natural disaster, there are still significantly higher costs to repair and replace property,” says Karen Collins, vice president of the American Property Casualty Insurance Association, an insurance industry group. 

• More Homes Are Built in Risky Climate Zones

Another factor is the explosion in the number of homes built in climate danger zones, Collins says. In wildfire-prone areas of Montana, for example, 22,000 homes were built between 1990 and 2018, according to figures by the research firm Headwaters Economics. Since then, an additional 31,000 new homes have been built in these risky zones, according to Wild Montana, a nonprofit that studies land use in the state. 

It’s the confluence of high risks and high costs that has prompted some insurers, such as Allstate, Farmers, and State Farm, to stop writing new policies in California, along with Farmers and Progressive in Florida. Having fewer insurers means some markets have less competition and higher premiums.

• Insurers Face Financial Turmoil

Adding to the problem is the fact that some insurance companies are finding themselves on shaky financial footing. 

When disaster strikes a house, the money an insurance company uses to pay for a consumer’s claims comes from three main sources: premiums it has collected, returns from investments like stocks and bonds, and reinsurance, a type of insurance for insurers that helps cover them when other funds fall short. 

But reinsurance has become significantly more expensive. Rates doubled between 2017 and 2023, according to a September 2024 Congressional Budget Office report (PDF). That cost gets passed on to consumers. 

And as interest rates increased in the past several years, insurers’ financial performance in the bond market declined, according to a June 2024 Congressional Research Services Report. 

Both increases in reinsurance costs and reduced bond performance matter, says Douglas Heller, director of insurance at the Consumer Federation of America, because it means insurers need more capital available in the event they need to pay claims when disaster strikes. To get it, “insurers raise premiums and reduce coverage,” he says.

Buying and owning homeowners insurance encompasses many experiences, including policy review, customer service, and claims. But our surveys indicate that certain aspects have a greater impact on our members’ satisfaction than others. The premium rating was the best predictor of customer satisfaction, according to our 2025 homeowners insurance survey, along with claims. Insurance premiums have “skyrocketed over the past few years, and people are very unhappy about that. We saw the same sort of thing happening last year with auto insurance ratings,” says Martin Lachter, the research program leader who led CR’s survey of homeowner insurance.

Check our homeowners insurance ratings to see how 28 popular home insurance companies rank in terms of claims handling, general customer service, advice, and premiums charged. 

Getting the best price, of course, is key. Some state insurance departments publish rate comparisons. Floridians, for instance, can go to Florida’s Office of Insurance Regulation website; Californians, to the California Department of Insurance website. You can also get quotes from an independent agent who sells policies from several insurance companies. (Find one through Trusted Choice, which is affiliated with numerous such companies.) Comparison-shopping sites such as Insure.com, NetQuote, and SelectQuote are also good places to start your research. 

Note, though, that our top-rated companies—NJM, Erie, and USAA (for military members, veterans, and their eligible relatives)—use their own agents, and their homeowners insurance might not be included in shopping sites. You’ll have to apply directly with each of them, not through an independent agent.

There are no state-mandated requirements for homeowners coverage, as there are for auto insurance in most states. What’s more, a mortgage lender may require you to insure for only 80 percent of the replacement value of your home (this is known as the “80 percent rule”). But being underinsured could leave you on the hook for a significant sum, especially if your home is destroyed and you need to completely rebuild. Buying too much coverage isn’t worthwhile, either. It’s a mistake, for instance, to assume you need coverage equal to your home’s market value. That amount includes the value of the land your home rests on, which will remain even after a catastrophe. That’s why, in most cases, your home’s market value will be higher than the cost to totally rebuild it.

General rule: Buy enough insurance to cover the labor and materials to completely rebuild your home, called the replacement value or replacement cost. Your insurance agent can help you figure out that amount. Mention unique features to make sure they’re accounted for, including any improvements you made in recent years.

Homeowners insurance policies generally include “loss of use” coverage, which pays the additional costs for you to live outside your home during rebuilding, up to a stated limit. That could take longer than expected—if, for example, a natural disaster hits your area and local builders are in high demand. So review this coverage with your agent to make sure you have enough.

Options, add-ons, and separate coverages will increase the cost of a standard policy. But they could save you a lot of money if disaster strikes. Keep in mind as you shop that some carriers may include these extras in their basic coverage and that others could charge an added premium. Here are some add-ons to consider.

• Extended replacement cost for your dwelling. A standard policy’s replacement cost coverage rebuilds your dwelling at current costs, up to a stated monetary limit. Extended replacement cost coverage pays 20 to 25 percent above that limit of coverage if building costs soar after a major disaster. Benefits can vary, depending on the state and insurance carrier, so be sure to check the details before purchasing. Be aware that this coverage is based on using standard building supplies, according to the Insurance Information Institute. If you want to replicate custom features, such as stained-glass windows or antique wood floors, you’ll need to purchase additional riders or buy another layer of coverage, called a restoration-cost policy.

Insurers that sell policies for high-end homes typically offer guaranteed replacement cost coverage. It’s a more pricey coverage that pays the full cost of replacing or repairing a damaged or destroyed home, even if it’s above the policy limit.

• Inflation protection. Also called inflation guard, this provision automatically raises the coverage limit on your dwelling to reflect increases in homebuilding costs. It’s typically part of a homeowners policy. Nevertheless, given how prices have risen in recent years, it’s wise to confirm that coverage with your agent.

• Earthquake, hail, and windstorm coverage. In our 2025 homeowners insurance survey, over one-fifth (21 percent) of CR members said they’d filed a claim in the prior five years. According to those claimants, wind and hail were the leading causes of damage. Depending on your state, you may have to pay a separate deductible for hail damage or buy stand-alone coverage. The same is true for earthquakes and high-speed windstorms.

• Content replacement coverage. A standard policy may reimburse you only the depreciated, or actual cash value, of stolen or damaged home contents. To avoid having to pay the difference when replacing possessions, pay the extra for replacement cost coverage. Document the contents of your home by making a video inventory of your possessions, and store it somewhere safe, such as in the cloud or on a thumb drive kept in a safe deposit box.

• Additional valuables. Homeowners’ policies typically put dollar limits on what an insurer will pay to replace valuables such as furs, firearms, jewelry, and home-based business property. For instance, you’d get at most $2,500 to replace stolen jewelry. (These lower limits often apply only to theft.) So buy a “floater” to supplement coverage on costly items. 

• Sewer backup. This coverage would protect you if, say, a municipal line failure caused sewage to back up into your home. (Sewage backup could also be caused by tree roots growing into the sewer line.) The cost can run from around $50 up to several hundred per year. Policy limits run between $5,000 and can go as high as the full cost of replacing your home. Insurers don’t offer it in every state, though, according to III. Typically, your homeowners insurance policy doesn’t cover a septic system on your property, though it will cover damage to your home due to a malfunctioning septic system or septic problems that caused overflow into your home. Damage to your home from a sump-pump malfunction would be covered, too, but the pump itself isn’t covered, so you’re responsible for the cost to fix it. 

• Ordinance, or law and endorsement: These can provide the extra coverage required to pay for the cost of rebuilding in compliance with updated local building codes. This extra coverage is generally purchased by homeowners with older homes.

The liability insurance limit included in homeowners policies (to cover costs and damages resulting from lawsuits) usually starts at $100,000. But depending on where you live, you could be sued for almost all your assets—including investments, real estate, and personal property. So increase your liability limit if the value of your assets exceeds $100,000. Your safest bet is to buy coverage worth at least as much as your assets. Umbrella or excess liability coverage can provide this added protection. It increases your liability protection beyond the limits of your home and auto policies in case you’re sued for accidental injury or property damage. To get it, you may have to raise the liability coverage limits on your auto and home policies first.

A $1 million umbrella liability policy generally costs a few hundred dollars per year.

Homeowners insurance policies will cover water damage only if it’s caused by a pipe or another system that breaks in your home. Protection against flooding and mud flows originating from the outside must be covered by flood insurance. If you live in a high-risk flood area, also known as a special flood hazard area, you’ll likely be required to purchase flood insurance if you also have a federally backed mortgage, the type of mortgage most people have.

But that coverage can be a very worthwhile purchase, even if you don’t think your property is vulnerable. The National Flood Insurance Program, part of the Federal Emergency Management Agency, says that 40 percent of NFIP flood insurance claims originate in moderate- to low-risk flood areas (identified on FEMA flood maps with the letters B, C, and X). The NFIP underwrites most flood policies in the U.S.; you can buy that coverage through most insurance agencies that sell homeowners and car insurance. Building policies cover up to $250,000 of flood damage, and content policies cover up to $100,000 of flood damage. (You can also buy additional coverage through a private flood insurance carrier.)

The typical annual flood premium through the NFIP runs about $700 a year for those in high-risk areas. Those in low- to moderate-risk areas will pay less. For a more precise estimate on your premium, go to NFIP’S official site, floodsmart.gov.

Here are some tried-and-true ways to bring down the cost of your premiums.

• Bundle coverage. Purchasing your homeowners and auto coverage from the same company can provide savings of up to 30 percent overall. You could save more if you bundle your boat or motorcycle insurance, too. 

• Raise your deductible. Higher deductibles equal lower premiums. Going to a $1,000 deductible from $500, for instance, can reduce your premium by a double-digit percentage, the Insurance Information Institute says.

• Make home improvements. Replacing old plumbing and adding a security system and water- or gas-leak detection sensors can each provide insurance savings of 2 to 6 percent or more. Replacing a standard roof with an impact-resistant one can save up to 35 percent in some states. Cutting back dry brush around dwellings and outbuildings in a fire-prone area can earn you a 5 percent break on your premium.

Making multiple claims in a short period could result in a rate increase or even cause your insurer to not renew your policy. That’s not a reason to avoid major claims, of course, but consider not making claims of just a few hundred dollars above the deductible. Doing so might erase discounts you’re getting for remaining claim-free. If you’re dealing with an independent agent, discuss the pros and cons with them before you report.

Insurers drop customers for a variety of reasons. They include:

• Cancellation: If you’re a new policyholder, an insurer can cancel your policy for any reason within the first 60 days. After that, it can cancel only if you don’t pay your premiums, you’re found to have lied on your application, or you’ve become a greater risk, says the National Association of Insurance Commissioners. This might happen, for instance, if the insurance company finds out you’ve installed a trampoline or obtained a dog of a breed that’s not covered by your policy. You have to be given notice of cancellation; that period varies by state.

• Nonrenewal: Your insurer can decide not to renew your policy after it expires. Sometimes that has to do with your filing too many claims; even small claims are red flags if they’re filed too frequently. But your insurer also can decline to renew you for reasons that have nothing to do with you, for example, if it has determined that it’s no longer making a profit insuring homeowners in your area. Your insurer will usually give you at least 30 days’ notice if it’s not renewing your policy. Here’s what you can do if it happens:

Confirm when the current policy expires and ask for a 30- or 60-day extension. Having more time will help you work through your options with your current insurer or shop around for new coverage without a pressing deadline. Although an insurer isn’t required to give you more time, it might offer a courtesy extension if asked, says Robin Nunn, a consumer advocacy attorney and partner at the Nelson Mullins firm in Washington, D.C. To do this, ask to speak with someone until you get as high up as needed, Nunn says. “And if you missed the mailed notice because of a specific reason, such as a death in the family, be sure to mention that as well,” she says.

Gather evidence. Ask for a written explanation for why the insurer sent a nonrenewal. For example, ask to see any aerial photos or video taken by drone or satellite that the insurer used to make its determination about a premium increase or cancellation, Nunn says. You’ll need these for the next step.

File an appeal right away. That worked for William Wilkin in Nashville, Tenn., when his insurer said it wouldn’t renew his policy unless he repaired his roof. Wilkin’s insurance agent got hold of the satellite images the insurer used when issuing a nonrenewal and was able to demonstrate that shadows from the trees made the roof (which was quite new) appear to be in disrepair. 

When combined with a roofer’s written inspection report and high-quality, close-up photographs of the roof submitted to the insurer with a letter, Wilkin was able to retain his insurance.

Act fast when asked to make repairs. When possible, make repairs without delay, Nunn says. That helped Joan Bobier in West Windsor, N.Y., retain her coverage after receiving a nonrenewal letter just two weeks before her existing policy was to expire. “They said they were going to cancel my insurance because I had moss on the roof,” Bobier says. She was able to get help on short notice and was quickly able to send pictures of a clean roof along with receipts.

Don’t wait for your appeal to be determined before you shop for a new policy. “You’ll want to start shopping for new insurance at the same time you’re working on the appeal, because you may just have 30 days or less to find new coverage,” Nunn says.

Find a local, independent insurance agent or broker. Doing so can be more efficient than looking online yourself, and they will be able to include smaller insurers that may operate only in your area or state. Not sure whether an agent is truly independent? Ask whether they act as a broker with multiple insurers or with just one or two companies. 

Can’t find a private plan? Look for a state-sponsored one. California, Florida, Hawaii, and New York, along with 29 other states and Washington, D.C., offer state-mandated plans for high-risk homeowners that are called Fair Access to Insurance (FAIR) plans. To see whether your state offers one, call its insurance office. (The Insurance Information Institute lists contact details for all 50 states.) If you live in Florida or Louisiana, consider plans offered in those states called Citizen plans, which aren’t as bare-bones as FAIR plans. As state-mandated plans, these are more expensive and generally offer less coverage, and because of that, they’re usually a last resort.

These plans have such limited coverage and are really intended to provide catastrophic coverage, according to the National Association of Insurance Commissioners. So you may want to consider a second, more comprehensive policy to cover everything else, Heller says. These add-on policies are known as “wraparound” coverage and can be purchased on the private market. Enlist the help of your broker to find one that works for you, Heller says.

As a last resort, shop for an E&S (excess and surplus) policy. If there are no FAIR plans in your state, or their coverage is too limited or too expensive, you could consider this kind of policy. These are not backed, reviewed, or regulated by the state you live in—and they can have all kinds of exclusions, restrictions, and limitations that you won’t find in a traditional home insurance policy, Heller says. He cautions homeowners to tread very carefully if considering coverage from these kinds of insurers.

But E&S policies might cover more types of risks, provide more protection, and offer higher deductible options than what’s allowed with traditional homeowner insurance plans approved by your state.

If you go this route, stick with larger carriers, such as AIG or Lloyd’s of London, because they’re less likely to go bankrupt in the event of a disaster, Heller says. If a company does go belly-up, you’ll have little legal recourse when trying to file a claim.

Our homeowners insurance ratings—covering 28 insurance groups—are based on responses to surveys fielded from December 2, 2024, to January 7, 2025, of both CR members and non-members. The Overall Satisfaction Score is derived from a weighted average of seven specific attributes and our CR Consumer Experience Score. 

Each rating category under survey results—claims, premiums, service, advice and help, coverage, policy review, policy clarity, website, and mobile app—reflects average scores on our six-point satisfaction scale ranging from completely satisfied to completely dissatisfied.