Home Insurance: How do I pick an insurance company?

Companies like State Farm and USAA that deal directly with consumers without using independent agents are called "direct writers". In theory, they can pass on their savings by eliminating the middleman.

Direct marketers like Geico, AIG, eSurance and Answer Financial save on overhead -- and pass on the savings -- by marketing by phone, mail, or the Internet (via sites like this).

Let your state be your guide. Most state insurance departments offer on-line shopping guides for homeowner's insurance. Your state's guide may identify little-known companies with competitive rates. Insure.com can link you to your state guide.

Look at service

No discount in the world will make up for slow claims processing, so find out as much as you can about a company's service before you sign on. Consumer Reports periodically publishes service ratings for large insurers. You can also ask a representative about a company's claims turn-around time; a shorter turn-around is an indication of better service.

Focus on financials

Nine insurers went belly-up following the unprecedented damage wrought by 1992's Hurricane Andrew. The 23,000 affected customers waited at least six months for a check from the state's insurance guaranty fund. For that reason, it's wise to look at the financial ratings of your home insurer. Ask the company for that information, or check out one of the financial ratings services on the Web. An A rating or higher from Standard & Poor's or an AA ranking or better from Moody's Investor Service is a good indicator of strength. Weiss Ratings, the most independent of the ratings services, and arguably the most stringent, publishes a list of the currently weakest homeowners insurers.

As a last resort, there's your state

Unfortunately, if your home's in a hurricane zone, you may be stuck with just one expensive option, your state-sponsored high-risk pool. But try shopping again a year from now. Private insurers are continually looking for new ways to cut up the market, and one company's black mark is another's business opportunity.

Some states provide assistance -- either shopping help or special coverage -- for homeowners who can't find insurance in urban or vulnerable coastal areas. Check with your insurance department for details.