Costco Home Insurance: 5 Things To Know Before You Buy It

It’s no secret that Costco is money expert Clark Howard’s favorite place to shop. You can get lots of different things — from food to clothes to hardware — at Costco. But did you know you can also buy homeowners insurance there?

If you’re thinking about purchasing your homeowners insurance through Costco, here are five things to keep in mind:

1. Costco doesn’t underwrite insurance.
2. The standard coverage is the same as other companies offer.
3. You may qualify for discounts on your premium.
4. Additional member perks are available.
5. You might not get the best deal on your coverage.

This article was updated in December 2023 and I review it annually. Details of notable changes can be found here.

1. Costco Doesn’t Underwrite Insurance

When you buy insurance, you’re paying a company to take on the risk of protecting your property against damages or loss. That company is known as the underwriter. So, the first thing to know is Costco doesn’t technically sell insurance.

Costco facilitates the process of enrolling members in homeowners insurance with CONNECT Insurance. CONNECT is a subsidiary of American Family (AmFam) Insurance. When you buy insurance through Costco, CONNECT by AmFam is your underwriter.

You don’t need a Costco membership to buy insurance directly through AmFam, which is ranked in the top 10 largest insurance companies in the nation. But purchasing your policy through Costco gives you access to deals and discounts that may not otherwise be available (which I explain later in this article).

A basic Costco membership costs $60 a year, but you’ll get access to more homeowners insurance benefits with an executive membership, which costs $120 annually. Team Clark has compared the value of Costco’s Gold Star (basic) membership to its Executive membership here.

CONNECT by AmFam Rating Information

From a financial standpoint, CONNECT is a reliable insurer. The company gets an “A” rating from insurance credit rating agency A.M. Best for its financial strength, which is based on financial security and a company’s ability to pay claims. On its website, A.M. Best says that an “A” rating means a company has “an excellent ability to meet their ongoing insurance obligations.”

Clark recommends paying careful attention to A.M. Best ratings if you’re shopping for term life insurance, but for homeowners insurance, he says that price and customer service are more important.

When it comes to customer service, CONNECT doesn’t rate very well. CONNECT has received more customer satisfaction-related complaints than average for a company of its size according to the 2022 Complaint Trend Report from the National Association of Insurance Commissioners (NAIC).

On the NAIC scale, a 1.00 rating is considered average, and anything above that means complaints against a company are “more than average.” Currently, CONNECT has a 4.72 rating from the NAIC. This means the company has a complaint index more than four times higher than expected in the market! This is also a significant increase in complaints since last year, when their score was 1.31. Complaints range from how long it took to receive payments for claims to unsatisfactory offers or settlements of claims.

And again, since Costco isn’t the actual insurer, the company won’t handle any insurance-related questions, concerns or needs after you enroll. You’ll rely on CONNECT’s customer service for support.

2. The Standard Homeowners Insurance Is the Same As Other Companies Offer

A standard homeowners insurance policy with CONNECT offers the same coverage options as other homeowners insurance companies, including:

• Dwelling: coverage for repair or replacement to the main structure of your home
• Liability: coverage for medical bills, repair costs and/or legal fees if someone is injured (or something they own is damaged) and you’re determined to be at fault
• Loss of use: coverage for living expenses in the event that you are not able to use your home
• Medical payments: coverage for medical bills if someone gets hurt on your property, even if you’re not at fault
• Other structures: coverage for repair or replacement of structures that are separate from the main building of your property
• Personal property: coverage for repair or replacement of property such as clothing or furniture in your home

CONNECT also offers additional policies for protection against perils that aren’t covered by standard policies, such as earthquake insurance. Your mortgage lender – or even local laws – may require these kinds of policies, or you may just want to consider them for additional protection. Many other insurance companies also offer the same or similar additional policies and add-ons.

3. Premium Discounts Are Available

CONNECT offers several discounts including:

• Age of home: may apply to coverage on newly built homes
• Claims free: may apply if you haven’t filed a claim within the last five years
• Home protection: may apply when certain security or safety features, such as video doorbells or smoke alarms, are added to your home
• Multi-product: may apply when you hold two or more insurance policies with CONNECT, such as homeowners insurance and auto insurance; also known as bundling
• Renovation: may apply after replacement of both heating and cooling systems, roof replacement, or removal and replacement of your entire electrical system or plumbing system within the last nine years
• Tenure: may apply once you have tenure, or reach the required policy anniversary, as an insured member with CONNECT

The availability of discounts varies by state, and each discount will have criteria for qualification. Again though, many other insurance companies offer members the same or similar discounts on premiums.

4. Costco Members Get Additional Deals

In addition to the standard coverages available, CONNECT offers several benefits at no extra cost for Costco members. These benefits may include:

• Check fraud protection: coverage for losses due to the unauthorized use of checks to illegally get money
• Equipment breakdown coverage: coverage for the breakdown of appliances and/or mechanical systems (excludes breakdowns caused by normal wear and tear)
• Identity theft protection: covers up to $5,000 in costs related to identity theft recovery
• Refrigerated property coverage: covers up to $500 for replacement of food spoiled because of a power outage
• Stolen credit card use protection: coverage for losses due to unauthorized credit card use due to lost, hacked or stolen credit cards
• Wildfire loss prevention: provides protection against loss resulting from wildfire

If you have an executive membership with Costco, you may also receive home lockout assistance (up to $200 annually) and glass repair reimbursement (up to $1,000 annually) at no additional cost. And there’s no deductible for claims using these benefits, but not every benefit is available in every state.

5. You Might Not Get the Best Deal on Your Coverage

Costco is known for having great deals, but there’s no guarantee that purchasing homeowners insurance from CONNECT through Costco will get you the best deal on your premium.

Many factors impact your rate, and insurance companies have different ways of deciding how much you’ll pay.

To find out if CONNECT for Costco members has a great deal for you, you’ll need to do your own comparison shopping.

“The whole thing about insurance is not necessarily to have the lowest premiums but to have the coverage you need if something goes wrong.”

When comparison shopping, it’s important to consider the coverage being offered for the rates you’re quoted. A lower premium isn’t a good deal if the coverage included won’t provide enough protection for your property.

Final Thoughts

Costco offers exceptional prices to members on many products and services, but there’s no guarantee this is one of those great deals.

It’s always worth comparing quotes and the quality of coverage from multiple companies to get the best rate available for your needs. We have a guide to the best homeowners insurance companies so you can compare top-rated options.