Did your homeowners insurance rates increase? You are not alone. Homeowners insurance premiums are rising nationwide. While some factors are beyond your control, understanding the key drivers can help you manage costs and take proactive steps to save on your insurance.
Here are the eight most common reasons for rate increases and practical strategies to lower your premium.
- Rising Inflation and Skyrocketing Rebuilding Costs
The cost of labor and construction materials has surged, directly impacting your dwelling coverage which is the portion of your policy that pays to rebuild your home. To ensure you are fully covered, insurers must raise coverage limits, which increases your premium. This trend is especially pronounced in areas with high construction demand or frequent natural disasters.
- Increase in Severe Weather and Catastrophes
More frequent and destructive hurricanes, wildfires, and severe storms have led to massive insurance claims. To remain solvent, insurers adjust premiums regionally based on actual and projected weather-related losses. If you live in an area now deemed higher risk, you will likely see a significant rate hike. For Minnesota specifically, hailstorms are a big reason for the increases in home insurance premiums.
- An Aging Home in Need of Updates
Older homes with aging roofs, plumbing, or electrical systems pose a higher risk for costly claims. If an inspection at renewal identifies these vulnerabilities, your insurer may increase your premium to account for the elevated risk until repairs are made. If you need to make repairs, make sure you have a reputable company working on them and you get the proper permits. Then report these upgrades to your insurance broker or company.
- A Dip in Your Insurance Score
Your insurance score is a key rating factor. It is a numerical representation of your risk level, derived primarily from your credit history and claims frequency. A lower credit score or multiple recent claims can signal higher risk, resulting in a premium increase.
How to Improve Your Insurance Score:
- Pay Bills on Time: Your payment history is the most significant factor in your credit score, which heavily influences your insurance score.
- Reduce Credit Card Balances: Aim to keep your credit utilization ratio below 30%.
- Maintain Older Credit Accounts: A longer credit history generally improves your score.
- Limit Hard Credit Inquiries: Avoid applying for multiple new lines of credit in a short period.
- File Claims Judiciously: Only file claims for significant losses. Frequent small claims can lower your score and increase your premiums. Keeping at least $5,000 in your savings for necessary repairs can help keep your claims frequency low.
- Changes in Your Coverage or Risk Profile
Have you recently installed a swimming pool, trampoline, or acquired a certain dog breed? These items increase your liability risk. Similarly, if you started a business from home or made significant renovations, your insurer may adjust your premium to reflect the new level of risk or increased home value.
- Local Claim Activity and Crime Rates
Even with a perfect personal history, your rates can be affected by broader trends. A surge in claims or thefts in your neighborhood or ZIP code can lead to higher premiums for all residents in the area.
Insurance companies assess risks based on the risk pool that you’re apart of. They group you with other policyholders who share similar risk characteristics. The collective claims history and risk profile of your entire pool directly influence the base rates for everyone in it.
- Statewide Regulatory Changes
Insurance is regulated at the state level. Changes in legislation, like adjustments to required coverage minimums or how insurers can calculate rates, can lead to across-the-board premium changes for all policyholders in your state.
- Your Insurance Company’s Financial Strategy
Sometimes, an increase is specific to your insurance carrier. An insurer may decide to reduce its exposure in a particular region or re-calibrate its pricing models, leading to premium changes that are not directly tied to your personal profile. That’s why it’s important to re-shop your insurance every 2-3 years to see if you can find a better rate.
How to Save on Homeowners Insurance
Take Proactive Loss Prevention Steps
Install safety devices like smoke alarms, water leak sensors, burglar alarms, and storm shutters. Inform your agent, as these often qualify for home insurance discounts.
Conduct an Annual Policy Review
Work with your agent to ensure your coverage is accurate. Remove coverage for items you no longer own but avoid cutting essential protections. Ask about new discounts you may now qualify for.
Consider a Higher Deductible
Opting for a higher deductible is one of the most effective ways to lower your premium. Ensure you have enough savings set aside to cover that deductible if needed. A higher deductible means you’ll be paying more out-of-pocket before your insurance policy kicks in to cover significant losses.
Shop Around and Compare Quotes
Loyalty does not always pay. If your premiums keep climbing, get quotes from several insurers. Be sure to compare identical coverage levels and deductibles for an accurate picture.
Get Expert Help Managing Your Costs
While market wide increases can be frustrating, you have more control than you think. Do not reduce critical coverage to save money. Instead, partner with a professional to find intelligent savings that work for your specific situation.
Contact ONYX Insurance Brokers today for a personalized coverage review. We’ll help you understand your rate increase, identify potential discounts, and shop the market to find you the best value for comprehensive protection.
