Motivation: Pair Hidden Markov Models (PHMMs) are probabilistic models used for pairwise sequence alignment, a quintessential problem in bioinformatics. PHMMs include three types of hidden states: match, insertion and deletion. Most previous studies have used one or two hidden states for each PHMM state type. However, few studies have examined the number of states suitable for representing sequence data or improving alignment accuracy. Results: We developed a novel method to select superior models (including the number of hidden states) for PHMM. Our method selects models with the highest posterior probability using Factorized Information Criterion, which is widely utilized in model selection for probabilistic models with hidden variables. Our simulations indicated that this method has excellent model selection capabilities with slightly improved alignment accuracy. We applied our method to DNA datasets from 5 and 28 species, ultimately selecting more complex models than those used in previous studies. Availability and implementation: The software is available at https://github.com/bigsea-t/fab-phmm. Contact: [email protected]. Supplementary information: Supplementary data are available at Bioinformatics online.