|Alabama Statistics Summary||Details|
|Median Home Price||$154,775|
|Biggest Home Insurance Company||State Farm|
|Average Annual Rate||$1,433|
|Direct Premiums Written Annually||$1,741,767|
|Homeowners Insurance Incurred Losses||$5,403,593|
A southern state with a long history, Alabama is a great place to call home. The state claims only a small piece of waterfront on the Gulf of Mexico but has easy access to some of Florida’s best beaches. Housing is affordable, even in the biggest cities, and the percentage of homeowners is above the national average.
Alabamans love their home state and believe just about everything there is superior to other states, including the barbecue and peaches (sorry, Georgia). They’re also very serious about college football, where loyalty to either Auburn or the University of Alabama is entrenched in everyday life.
Whether you are new to Alabama or born and raised in the Yellowhammer State, buying a home here means you need home insurance. You’re looking to protect your biggest investment, so you want to make the right choice. But shopping for home insurance is confusing, and there are a lot of companies and coverage options to choose from.
This guide has everything you need to know to buy home insurance for your Alabama residence. We’ll cover home insurance companies, average rates, and the biggest risks to your home so you can choose the best coverage.
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Alabama Home Insurance Coverage and Rates
Home insurance is designed to protect you and your house from a variety of risks. A standard policy covers more than just the house itself — it’s a comprehensive policy that can stand between you and financial disaster in the event of a serious loss. Choosing the right amount of home insurance coverage is important but can be complicated.
A basic homeowners policy comprises the following coverage:
- Dwelling coverage, which protects the home itself
- Other structures coverage, for any building not attached to the main structure
- Personal property coverage, which is also called contents coverage
- Personal liability to protect you from lawsuits
- Additional Living Expenses (ALE, also known as Loss of Use), which pays for things like food and hotels if you can’t live in your house due to a covered loss
Rates for home insurance in Alabama vary depending on different factors, including location as well as specifics of the home and the homeowner. In this section, we’ll take a look at the coverage available to Alabama homeowners and what they can expect to pay for that coverage.
Average Premiums in Alabama Three-Year Trend
Alabama’s average home insurance rates have been rising over the past three years, with a large increase each year. That follows the countrywide trend of increases each year. General increases from year to year are common as the cost of building materials goes up over time.
As you can also see from the numbers below, Alabama has higher rates for home insurance than the national average. There can be a lot of reasons why a particular state has higher rates. In this case, the parts of Alabama that are along the Gulf of Mexico and in the path of hurricanes may be partially to blame. We’ll take a look at the risks in the state that affect rates later in this guide.
Alabama rates are still lower than neighboring Florida, where the average rate for 2017 was $1,951. To the west, Mississippi also has higher rates, with a 2017 average of $1,537.
A standard homeowners policy covers risks such as fire, theft, and storm damage. However, some risks are excluded from standard policies, such as flooding and earth movement. Additional policy add-ons or endorsements must be purchased to cover damages caused by these occurrences.
While earth movement isn’t particularly common in Alabama, flood insurance is a popular add-on, particularly in coastal areas. In some cases, your mortgage company may require it. Flood insurance is available through the National Flood Insurance Program, and many insurance companies partner with this program to provide coverage.
In 2018, the III reported a total of 54,348 flood policies in force in Alabama.
Add-Ons, Endorsements, and Riders
Here’s a quick look at the common coverages you can choose to add to your home policy.
- Earthquake/Land Movement may be an endorsement in some cases rather than a separate policy. This coverage includes landslides and other forms of earth movement.
- Water and Sewer Backup differs from other forms of water damage and specifically targets backups from drains and sewers.
- Equipment Breakdown is something like an extended warranty for systems and appliances in your home. It can cover things like the furnace, air conditioning unit, and major appliances.
- Inflation Guard/Guaranteed Replacement Cost ensures your home policy will pay for the full replacement of your home should the dwelling coverage not be enough in the event of a total loss.
- Personal Property Replacement Cost ensures your personal property will be covered at the cost to replace it with similar items, rather than based on an actual cash value.
- Home Business is an endorsement that protects equipment related to running a business out of your home. This can include computers and furniture. It can also protect you from liability concerns related to a home business.
- Watercraft policies allow a homeowner to tack a small watercraft, like a boat or personal watercraft, onto the home policy. This may not be sufficient if you have a loan on your boat, so check with the lender and verify what’s covered.
- Identity Theft can be costly to recover from, but this endorsement will replace lost funds and help pay the fees involved in setting things straight.
- Secondary Residence covers a second home, such as a vacation home. Depending on the home, you may want to consider a separate policy instead.
- Limited Term Endorsements are endorsements that cover a temporary risk. This can include renovations and the home being vacant during remodeling.
- Floaters/Riders for high-value items are only covered to a limit on the main policy. These items could include:
- Fine arts
- Computer Hardware and Software
- Business Personal Property
Homeowners exclusions are common across most states, but some risks can result in companies applying special rules. In Alabama, some companies may apply deductibles or have exclusions related to hurricanes.
Under Alabama law, it is legal for a home insurance company to deny or exclude coverage for certain pets, includes dog breeds that are considered to be higher risk.
Best Alabama Home Insurance Companies
There are a lot of companies selling home insurance in Alabama, all promising great coverage and service. If you’re looking for a clear breakdown of the need-to-know when it comes to the best home insurers in Alabama, then we’ve got you covered. In this section, we’ll look at how the top companies in the state stack up in terms of financial ratings, complaints, and trustworthiness.
The Largest Companies’ Financial Rating
Financial ratings indicate the stability of a company, which is especially important in a place like Alabama, since the weather can wreak havoc, resulting in an increased amount of insurance payouts.
Here’s a look at the A.M. Best ratings for the top 10 largest home insurance companies in the state.
|Company||A.M. Best Rating|
|Alfa Mutual Group||A++|
A.M. Best ranks companies on a letter scale for financial strength. All of the top 10 companies rate either Excellent (A, A-) or Superior (A+, A++).
Companies with Best Ratings
To understand how these companies are performing in terms of customer satisfaction, we look to independent rating agency J.D. Power, one of the best-known sources of consumer surveys. J.D. Power awards companies each year for topping their lists.
There are two homeowners insurance surveys done by Alabama annually, along with a renters insurance study. Both are national surveys, meaning regional companies won’t appear in the ratings. As a result, we don’t have Alfa Insurance included in these ratings.
Let’s take a look at the ratings that are available for the top 10 companies in Alabama, with the exception of Alfa.
|Company||Home Insurance Study||Renters Insurance Study||Property Claims Study|
|Country Financial||814 points|
|Liberty Mutual||792 points|
|State Farm||831 points|
You’ll see two rankings for each company: total points awarded on a 1,000-point scale and a rating out of five. These are J.D. Power’s Power Circle Ratings®, which are released to consumers. The legend for these ratings is as follows:
- Five Circles: Among the best
- Four Circles: Better than the rest
- Three Circles: About average
- Two Circles: Below Average
The highest-rated company each year is given the J.D. Power Award. Amica Mutual won the award for both homeowners and property claims in 2019, a title they have held for several years, and American Family topped the renters study. The latter doesn’t operate in Alabama.
Companies with Most Complaints in Alabama
The National Association of Insurance Commissioners gathers complaint data on insurance companies and compiles them in a complaint index. Below you will find the number of complaints filed for each of the top 10 companies in Alabama, as well as their rating on the National Complaint Index.
|Company||Number of Complaints in Alabama||National Complaint Index|
|Alfa Mutual Group||1||0.67|
The National Complaint Index is 1.00, and a number below that is considered a below-average number of complaints. All of the top 10 companies in Alabama rank below average on the complaint index.
Largest Home Insurance Companies in Alabama
We’ve already looked at some of the data on the largest home insurance companies in Alabama. Now let’s take a look at how much of the market those companies cover.
|Company||Direct Premiums Written||Market share|
|Alfa Mutual Group||$235,417,000||13.5|
|Farmers Insurance Group of Companies||$84,392,000||4.8|
State Farm is the biggest by a wide margin with almost a third of the Alabama home insurance market. Alabama-based Alfa Mutual comes in second.
Number of Insurers in Alabama
There are two types of insurance companies in any state: domestic and foreign. Domestic insurance companies have their headquarters in their respective state, whereas foreign insurers have their headquarters in a different state.
In Alabama, there are 18 domestic insurance companies and 858 foreign insurance companies; this covers all of the property and casualty insurers, not only home insurance companies.
You know you need car insurance in Alabama, but do you need home insurance? What are the laws that apply to homeowners insurance coverage? What do you need to know before you buy or when you file a claim? We have provided a guide that provides everything you need to know as a homeowner about Alabama law, such as whether you have to carry coverage and information on insurance fraud.
Home Insurance Laws
You are not required by any state law to carry home insurance in Alabama. That said, if you have a mortgage (and most homeowners do) your mortgage company can and will require you to have a policy.
If you fail to carry a homeowners policy that meets the mortgage company’s requirements, they can legally force-place insurance on you. This means they take out a policy that protects only their interest in the home. There is no coverage at all for you or your personal property in that policy, and they can and will make you pay for the policy.
Force-placed insurance is more expensive than a homeowners policy, so it is in your best interest to keep a policy in force.
Let’s take a look at some of the other laws and programs surrounding home insurance in Alabama.
Home insurance companies have a list of requirements a home has to meet to qualify for coverage. These include things like the age of the home, condition of the home, and renovations and updates that have to be made to older homes.
When a home doesn’t qualify for a policy with the standard companies, there are non-standard companies that may offer a policy. These companies specialize in harder-to-insure homes.
In some cases, a home may be considered too high-risk to qualify for insurance on the open market. The Alabama Insurance Underwriting Association helps those homes, specifically in coastal areas, to obtain a policy. The coverage offered through this plan also requires that the homeowner carry a separate flood insurance policy.
Valued Policy Law
Alabama does not have a valued policy law, unlike some other states. Valued policy law states that an insurance company must pay out the full value of the policy in the event of a total loss.
In other words, if your home were to burn to the ground and nothing could be recovered at all, an insurance company in a valued policy state would have to pay the full limits of the policy. In Alabama, however, insurers can use the calculated value of the loss.
So, if you have $200,000 in dwelling coverage and $100,000 in personal property coverage, valued policy law would state that the insurance company must pay out $300,000 regardless of the replacement cost. If the replacement cost of the dwelling is calculated at $175,000 and your personal property at $50,000, the total amount paid out in Alabama would be $225,000.
Home Insurance Fraud in Alabama
Criminal fraud is a felony in Alabama and carries stiff penalties. For insurance fraud under $1,000, the crime is a Class C felony and carries a prison sentence of up to 10 years. For fraud over $1,000, the crime is a Class B felony and carries a prison sentence of up to 20 years.
According to the Alabama Department of Insurance Fraud Bureau Annual Report, the Bureau handled 225 cases in 2018 with 17 percent of those resulting in an arrest.
Home insurance fraud includes things like padding real claims and false claims. Whether you add additional losses to a real claim, such as claiming to have lost personal property you never owned in a fire, or fake the claim entirely, the penalties are much the same.
Fraud in Alabama should be reported to the Department of Insurance. There is an online fraud reporting service, and email addresses are available for every member of the fraud bureau on the website.
Here’s how to contact the Alabama Department of Insurance:
Alabama law outlines several rules insurance companies are required to comply with to do business in the state. This Homeowners Bill of rights includes the right to competitive pricing practices, accurate advertising practices, and a complete copy of the policy and any endorsements.
Since 2013, the law has also required that Alabama insurance companies provide every policyholder with a policy checklist and an outline of coverage.
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Alabama Home Safety
There are countless risks to your home and a lot of different insurance policies that may or may not cover each of those risks. When you’re shopping for insurance, it’s hard to tell which risks should worry you the most. Should you add extra personal property coverage to protect against a high crime rate? Do you need flood insurance? How can you be sure?
This section will break down the risks in Alabama and help you understand how common each type is in your area. We’ll cover burglary, fires, and catastrophes.
Property Crimes in Alabama
The FBI gathers data on a variety of crimes, including burglary. Below you will find a table you can search to see how many burglaries took place in your city in 2018.
|Bayou La Batre||70|
Because all burglaries are counted together, these numbers include nonresidential theft. However, the FBI estimates that 67 percent of burglaries are residential.
Home Fires in Alabama
The Alabama Fire Marshal releases an annual report each year that provides information on fires, including house fires, and the damage they cause. The U.S. Fire Administration also collects and reports fire data. Let’s take a look at some of the statistics.
In 2018, 73.9 percent of fires were residential. 275 fires occurred in single-family dwellings.
There were a total of 75 fatalities as a result of fires in 2018. The good news is that the number of fatalities is the lowest over the past 10 years.
|Residential Fires||Fire-Related Fatalities||Number of Fire Departments|
Smoke alarms were not present in 54 percent of the fires where a fatality occurred. There is a good reason why insurance companies offer a discount on homes that have smoke alarms installed.
Catastrophic Risks in Alabama
Catastrophes across the nation cost insurance companies billions and are difficult losses from which to recover. That’s particularly true in catastrophes involving damage not covered by a standard home insurance policy, such as floods.
In 2018, Alabama ranked seventh among the top states for catastrophic losses with 60,700 catastrophic claims, according to the Insurance Information Institute (III). Those claims involved $1,133,500 in insured losses.
Data from the Rocky Mountain Insurance Information Insititute shows that between 30–39 percent of losses in Alabama were catastrophe-related from 2009–2013.
Let’s break down the catastrophe data into categories.
Flooding in Alabama
National Weather Service flood information lists the following types of flood risks for Alabama:
- Flash flooding
- River flooding
- Tropical systems and coastal flooding
- Dam breaks/levee failure
They also list the following as the three most recent significant Alabama floods:
- Flood of March, April 1979
- Flood of March 1990
- Tropical Storm Alberto, July 1994
Flood insurance is available in Alabama and must be purchased separately from homeowners insurance. FEMA offers maps of flood zones where you can search a home address to determine whether flood insurance is required for you.
Wildfires in Alabama
The III reports a total of 970 wildfires in Alabama in 2018; those fires burned 15,464 acres of land.
According to States At Risk, Alabama is not properly prepared to deal with wildfires, which are expected to increase in the coming years. The state was given a dismal F grade in terms of preparedness.
Alabama does participate in the Firewise USA® program in cooperation with the Alabama Forestry Commission. They don’t have a dedicated state Firewise site, however.
Earthquakes in Alabama
When you think of earthquakes, it’s likely California comes to mind. However, they do occur in Alabama, and some areas have a relatively high risk.
The United States Geological Survey (USGS) National Seismic Hazard Map shows the highest number of damaging shaking events in northern Alabama. The USGS is also very clear about the fact that damaging earth movement can happen anywhere.
An endorsement to your homeowners policy to cover earth movement, if available from the insurance company, can protect you from the high cost of this type of damage.
Extreme Weather in Alabama
Several extreme weather risks are common in Alabama. The biggest are hurricanes and tornadoes.
The III reported a total of 52 tornadoes in Alabama in 2018, ranking the state fifth for tornadoes in the nation. Homeowners insurance does usually cover damage from tornadoes.
Hurricanes are the other major weather event common in Alabama. Harvey, Irma, and Katrina all caused damage and losses in Alabama. Those three were part of the top five costliest hurricane seasons in history.
The National Flood Program paid out more for losses during Katrina than any other hurricane in history. Flood policy losses totaled $16,258,000.
While homeowners insurance does cover some hurricane damage, flooding that occurs as the result of a hurricane usually falls under flood insurance rather than standard homeowners. Claims are often split between the two policies.
Home Ownership in Alabama
With a median home value that’s affordable compared to other states, Alabama homeownership may be easier to achieve than in other parts of the country. Home values are increasing, however, so buying as soon as possible is a good move. According to Zillow, the home market in Alabama is very hot, with home values expected to continue to rise.
Let’s take a look at the costs of owning a home in Alabama.
Home Ownership Statistics
Alabama had a homeownership rate of 68 percent in 2018. Data USA shows a relatively stable level of homeownership in the state over the past few years.
Average Home Price
The median home sale price in Alabama is $154,775 according to Experian’s most recent data. That makes Alabama more affordable than neighboring Florida, where the median price is $229,000, as well as Georgia, where the median sales price is $194,500.
The most expensive county in Alabama is Shelby County, where the median home value is $221,847 — well above the state average.
Mortgages in Alabama
The average mortgage debt in Alabama for 2019 is $140,659, according to Experian, which is a slight increase from the 2018 average of $137,854.
As home values go up, so too does the average mortgage debt. Since Alabama’s market values have been increasing, it stands to reason that people will wind up with more debt.
Property Taxes in Alabama
The average property tax in Alabama for an assessed value of $150,000 is $633. That is well below the national average of $1,620 for that same value. St. Clair County has the highest property taxes in the state, with an average of $975. Jefferson County is not far behind at $946. Choctaw County has the lowest property taxes, with an average of $200.
The Bottom Line
Alabama offers below-average house prices and property taxes that make up for a somewhat higher-than-average home insurance cost. In addition to paying that basic homeowners premium, Alabama homeowners should consider flood insurance, especially in coastal areas.
With both hurricanes and tornadoes threatening Alabama homes each year, making sure that your home insurance covers you properly is a must. Fortunately, there are many solid home insurance companies in Alabama to choose from.
You can get started comparing rates on Alabama home insurance right now. Just enter your ZIP code in the handy quote box.