Have you just renewed your policy and found out that your rates are hundreds of dollars higher than they were last year? You’re probably wondering how this happened. Here are a few of the most common reasons your homeowners insurance rates went up.
Record-High Inflation
In some cases, your insurer will increase your rates because of something within your control — for example, maybe your roof needs to be replaced or you filed a claim recently. But the fact of the matter is home insurance premiums are going up everywhere due to the surging cost of labor and construction materials.
Your rates are based heavily on how much dwelling coverage is in your policy — this is the part of your home insurance that pays to rebuild your home if it’s damaged or destroyed. As rebuild costs continue to skyrocket due to inflation, homes are requiring higher dwelling coverage limits to keep up with the rising prices. This has led to higher home insurance rates across the board, but the outlook is even grimmer in areas that are already prone to natural disasters.
Extreme Weather Events and Catastrophes
Hurricanes, floods, droughts, wildfires and other severe weather events have become more frequent, destructive and costly. As weather-related damages go up, so does the cost of insurance overall. Insurers typically adjust rates on a state-by-state basis based on actual and anticipated weather-related losses.
Your House Is Older and Due for Upgrades
Some of the most common home insurance claims are due to water damage after a burst pipe or roof leak. These are also among the most expensive types of home insurance claims. If your insurance company conducts an inspection at renewal and discovers your roof needs to be replaced or you need new plumbing or electrical work, it may increase your rates to account for the high risk of claims.
Your Insurance Score Went Down
Another factor that determines your home insurance rates is your insurance score, which measures how statistically likely you are to file a claim. Carriers typically determine your insurance score by combining your credit score and claims history, among other factors.
A lower insurance score generally means higher premiums, so if your credit took a dip recently or you filed a claim or two in the last year, that may be the reason your homeowners insurance went up.
Factors Impacting Your Homeowners Rate You May Be Able to Control
Current market conditions that affect your insurance premiums may be out of your control, but there are steps you can take to help keep the cost of your homeowners coverage in check.
- Take steps to prevent losses.Be sure to check with your agent about any savings you might qualify for as a result of the preventative measures you take. For example, most insurance providers offer insurance premium discounts for smoke detectors, fire alarms, water sensors, interior sprinkler systems and smart home protection devices.
- Review your insurance.Ask your insurance agent to review your current coverage to ensure you’re getting the customized protection you need. Make sure all home improvements are accounted for. Cancel or reduce coverage you no longer need.
- Increase your deductible.A higher deductible will likely reduce your premium. Just remember to have enough savings to cover your deductible should you experience a loss.
- Bundle your coverage.Most insurance providers offer discounts when you purchase more than one policy with them. Home and auto are commonly bundled for a discount, but discounts may also apply to boat, valuables and personal umbrella protection and other specialty coverages.
It can be tempting to lower your coverage levels to save yourself some cash when you get that home insurance bill with elevated premiums. But don’t slash and burn just yet, as you might accidentally render your coverage pointless if you make too many cuts. Instead, work with your insurance provider to learn exactly why your premium increased and what can you do to change it, so you can still save money without risking your home’s protection.
What To Do If Your Costs Keep Rising
If your homeowners insurance premiums are becoming unaffordable, don’t hesitate to shop around with different insurance companies and see if there’s a better offer. There’s no rule stating you need to stick with the same insurance company forever, so explore your options if your premiums keep rising from year to year.
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