Opening your home insurance renewal notice to find a significant premium increase is a frustrating experience. You’re not alone! Rates are rising across the country. While some factors are beyond your control, understanding why your premium increased is the first step to managing costs.
Here are the six most common reasons your homeowners insurance rates went up.
- Record-High Inflation and Rebuild Costs
This is the single biggest driver of nationwide premium increases. Your dwelling coverage is based on the cost to rebuild your home from the ground up, not its market value.
With the soaring prices of construction materials and labor, the amount of coverage you need has also risen. To ensure you’re fully protected, insurers must adjust premiums to match these skyrocketing home rebuild costs. This impact is even more pronounced in areas already vulnerable to natural disasters.
- More Frequent and Severe Weather Events
The increasing frequency and intensity of hurricanes, wildfires, floods, and severe storms have led to catastrophic losses for insurance companies. When insurers pay out billions in claims across a state or region, they often adjust premiums for all policyholders in that area to spread the risk.
If you live in an area now considered higher risk, you’ll likely see that reflected in your rate. For example, Minnesota has seen an increase in hail damage claims and that’s impacted home insurance premiums.
- Your Home’s Age and Needed Upgrades
An older home often comes with older systems. If a routine inspection reveals an aging roof, outdated plumbing, or old electrical wiring, your insurer sees a higher risk of a major claim.
Water damage from burst pipes and roof leaks are among the most common and costly claims. An insurer may raise your premium to account for this increased risk until necessary upgrades are made.
- A Change in Your Insurance Score
Your insurance score is a key factor in determining your premium. It’s a number that insurers calculate based on your credit history and claims history. A dip in your credit score or filing one or more recent claims can signal a higher risk to the insurer, resulting in a higher rate at renewal.
- You’ve Made Changes to Your Coverage or Property
Did you recently:
- Build a new addition?
- Install a swimming pool or trampoline?
- Increase your coverage limits?
Any change that increases your insurer’s potential liability or the cost to rebuild your home can lead to a premium adjustment.
- Claims in Your Vicinity
Even if you have a perfect claims history, your rates can still be affected by broader local trends. A surge in claims within your neighborhood or ZIP code (whether from theft, vandalism, or severe weather) can lead to higher premiums for everyone in the area.
This happens because insurance companies assess risk at a group level, not just individually. Policyholders are often grouped into “risk pools” based on location. When one part of the pool experiences more frequent or severe claims, insurers may raise premiums across the entire group to balance the increased risk and potential payouts.
What Can You Do to Control Your Home Insurance Costs?
While market-wide increases are often unavoidable, you have more power than you think to manage your premium.
- Prevent Losses: Proactively protect your home. Install smoke detectors, water leak sensors, security systems, and storm shutters. Many insurers offer discounts for these safety features. Weather proofing your home when the season change, can be a helpful way to get ahead of damaging weather events.
- Review Your Policy Annually: Work with your agent to ensure your coverage is accurate. Remove coverage you no longer need (e.g., for a donated item) but avoid slashing essential coverage, which could be a costly mistake.
- Increase Your Deductible: Opting for a higher deductible is one of the most effective ways to lower your premium. Just make sure you have enough savings to cover that deductible if you need to file a claim.
- Bundle Policies: Most insurers offer a multi-policy discount for bundling your home and auto insurance (and other policies like umbrella insurance).
Tired of Rising Premiums? It Might Be Time to Shop Around.
Loyalty doesn’t always pay. If your premiums keep climbing, the best course of action is to compare quotes from multiple insurance providers.
Contact ONYX Insurance Brokers today for a free, no-obligation coverage review. We work with a network of top-rated carriers to find you the right protection at a competitive price.