Warehouse club Costco consistently ranks at or near the top of the pack when consumers are surveyed about the retailers they like and trust most. But does consumers’ faith that Costco will give them a great deal on rotisserie chicken mean they should obtain homeowners insurance through the company?
“People who are long-time members of Costco are probably used to getting things you wouldn’t normally get at a store from Costco,” says Rob Bhatt, insurance analyst for LendingTree.com. “They have a good reputation for travel products, gasoline, tires, all those things. So why not insurance?”
Bhatt walks us through what consumers need to know about the homeowners insurance sold by Costco…
What Is Costco Home Insurance?
Costco members can purchase homeowners insurance through the company, but Costco is not an insurance company. “Costco doesn’t underwrite the insurance itself,” explains Bhatt. “It hooks you up with policies from its partner companies. It’s through a relationship with American Family.”
American Family Insurance is among the nation’s leading issuers of homeowners insurance, according to the Insurance Information Institute. The company’s home and auto insurance policies are typically marketed under the name “CONNECT, powered by American Family Insurance,” and its homeowners polices are usually underwritten by its Homesite subsidiary, though details can vary by state.
Should consumers be concerned that Costco is handing them off to a third-party company, not actually underwriting the insurance? Bhatt doesn’t think this should be a deal breaker. “American Family is a good, legitimate company,” he says.
Coverage Options Offered Through Costco
The homeowners insurance offered through Costco insurance partner companies provides coverage that’s very much in line with other homeowners insurance. The policies provide coverage for most forms of damage to the home, as well as to other structures on the property and the policyholder’s personal possessions.
Like most homeowners policies, they also cover certain expenses related to loss of use of the home if it’s rendered uninhabitable, and they include liability coverage plus medical payments coverage in case a guest is injured on your property.
Limits, exceptions, and deductibles apply to all of this coverage, as they do with any other homeowners insurance policy, so review policy details.
Like other homeowners insurance policies, the coverage that Homesite offers to Costco members does not cover damage from floods, earthquakes, or negligence on the part of the homeowner, among other exclusions.
Costco insurance coverage options that can be added to Homesite policies include water backup and sump overflow coverage, in case a sump pump fails, or a sewer line backs up…equipment breakdown coverage, in case major mechanical home components fail…and scheduled personal property coverage, if the policy’s standard personal property coverage is insufficient to protect all of the policyholder’s possessions. “I’m seeing all of the most essential homeowners coverage,” says Bhatt.
Other optional coverages that can be added include identity fraud expense protection and service line coverage, which can help cover the cost of repairing damaged utility lines and pipes under the property. Condo and renter’s insurance also are available through Costco.
Member Benefits and Discounts
Since Costco’s homeowners insurance is actually provided by Homesite, some consumers might wonder why they should bother buying through Costco rather than directly though Homesite. But buying through Costco can be advantageous.
The first and potentially largest upside is that Costco members “may receive an exclusive discount.” How large is that discount, and who, precisely, is and isn’t eligible to receive it?
Costco doesn’t disclose the details, though its website does note that this discount is not available in Tennessee and Florida. Considering the high cost of homeowners insurance in many parts of the US, any potential discount is worth exploring.
“The member discount it offers to insurance customers could be the thing that makes it the cheaper option for you compared to other companies,” says Bhatt.
Costco members often receive a “bundling” discount if they purchase both home and auto coverage through Costco. Home insurance bundling with Costco typically means also purchasing auto insurance through American Family Connect.
If you have a Costco Executive membership rather than the standard membership, you could qualify for additional Costco insurance benefits as well, including…
- Home glass repair reimbursement. This provides up to $1,000 per occurrence up to twice per 12-month period.
- Home lockout assistance. This pays up to $100 per occurrence up to twice per 12-month period.
Availability by State
Costco homeowners insurance is available across most of the US, but not everywhere. It is not currently available in Alaska or Hawaii, and recent reports indicate that new policies are no longer being issued in California or Florida either.
Costco home insurance availability by state can change, however—there is no guarantee that it will always be available where a particular Costco member lives.
How to Get a Quote and Purchase
To learn more about Costco homeowners insurance, obtain a quote and/or purchase a policy, visit Costco.AmFam.com, or call 888-404-5365.
Costco warehouses cannot provide quotes. Third-party insurance quote comparison websites and independent insurance brokers do not typically provide Costco insurance quotes either.
Pros and Cons of Costco Home Insurance
Costco’s homeowners insurance is relatively solid coverage provided through a well-established and financially sound insurance company.
Most Costco members who apply are likely to be quoted competitive rates—not only can the Costco home insurance discounts cited above provide savings, but being a Costco member sends a signal to the insurance company that this probably is a desirable applicant.
“A person who fits the Costco member profile is going to fit in with the good insurance profile,” says Bhatt. “They tend to be in the middle class to upper-middle class range; they tend to be responsible people who are going to have a decent driving record and a low claims history. Folks who probably take care of their home and keep up on their home repairs.”
But consumers should not simply assume that Costco insurance can be depended on to provide the sort of value for which Costco is famous.
Any Costco member can pay a low price for a hot dog and a Coke…but insurance companies offer appealing rates to some applicants and unappealing rates to others, and Costco’s insurance partners are no different—there is no such thing as Costco member insurance rates.
“There are dozens of factors that insurance companies review to set their rates, including their prior claims history, the type of home they have, its location,” says Bhatt. “Is Costco insurance the cheapest option for everyone? Probably not. But it’s good to get a quote and compare it to some of the other companies in your area.”
Another downside: To obtain Costco insurance, you’ll need Costco membership, which currently costs $65 per year for the standard “Gold Star” membership or $130 for “Executive” membership, which provides the Costco executive member insurance perks noted above, plus higher rewards rates for most Costco purchases and other extras.
How Costco Home Insurance Compares to Other Providers
When people pick a homeowners insurance provider, they don’t just want low rates; they want to be confident that their insurer won’t let them down when needed. Can they trust Homesite, the insurer that provides Costco’s coverage?
The National Association of Insurance Commissioners’ complaint statistics paint a somewhat negative picture, though precise numbers are difficult to pin down because Homesite operates with different subsidiaries in different states.
“Its largest subsidiaries have more complaints than average over things like claims,” says Bhatt. “It’s sometimes difficult to work with.”
