A ton of factors affect the cost of homeowners insurance. Even with proper home maintenance, homeowners are seeing an increase in their insurance rates. Let’s discuss why rates are increasing and how you can keep your insurance premiums affordable.

Price Increases for Homeowners

In a recent survey by SafeHome.org, 43% of homeowners indicated their insurance premiums have increased in the past year, rising to an average of $1,584. Let’s take a look at what is causing this increase.

Increased Reconstruction Costs

Due to supply chain issues, construction labor shortages, and record-high inflation, the cost of repairing and rebuilding homes has increased substantially from 2020 through 2022. This has directly affected the cost of homeowners insurance – the higher the replacement cost of the home, the higher the insurance cost.

With increased construction costs, do you have the right amount of coverage on your homeowners insurance?

Increase in Natural Weather Disasters

Over the last few years, the home insurance industry has experienced record-setting claim payouts and financial losses due to a higher occurrence of more extreme natural disasters. In 2021, there were 20 separate billion-dollar natural disasters in the United States – costing a total of $145 billion. These disasters include hurricanes, tornadoes, wildfires, flooding, and other severe weather events.

The increase in costly natural disaster events, combined with increasing construction costs, is triggering increases in the price of homeowners insurance.

Claims

If you file a claim on your home insurance, this may cause your premium to increase temporarily. The amount your premium increases after filing a claim depends on several factors, including:

  • Your personal claims history
  • Type of claim
  • Degree of damage
  • Where you live

The cost of your home insurance may also increase based on claims in your area. For example, if extensive damage occurs in your community due to a major hail storm, your rate may increase along with the rate of everyone else in your area.

Loss of Discounts

A variety of discounts can be applied to your homeowners insurance to help bring your rate down. If you are seeing an increase in your insurance premium, here are a few discounts you may have had that are no longer in effect.

  • Advance quote discount. This discount can be applied to your policy when you first purchase insurance and is typically reduced/removed over time.
  • New roof credits. As the roof on your home ages, this discount will start to decrease each year at renewal. If you have recently replaced your roof, let your insurance agent know so this discount can be renewed on your policy.
  • Newer home discount. As your home ages, this discount will decrease each year at renewal. If you have made recent updates to your home (e.g., electrical, plumbing, heating), talk with your insurance agent about discounts for upgrades that may apply.
  • Claims-free discount. The longer you go without filing a claim on your homeowners policy, the more you will be able to save on your insurance with a claims-free discount. Most insurers will apply this discount after you have been claims-free for three to five years. If you file a claim, this discount will only apply once sufficient time has passed after the claim.

How You Can Lower Your Insurance Costs

From taking advantage of available discounts to mitigating risk, you can do various things to help lower your insurance costs.

Tips for Lowering Your Homeowners Insurance Premium

  • Maintain a good credit history. Your credit information is taken into consideration when insurers price homeowners insurance policies.
  • Raise your deductible. Increasing your deductible from $500 to $1,000 could save you up to 25% on your insurance premium.
  • Insure your home and auto with the same insurance company to take advantage of multi-policy discounts.
  • Review your coverage on an annual basis. Are there items you’ve been paying to insure that have depreciated in value or that you no longer own?
  • Properly maintain your home, so it is more disaster resistant by taking steps to prevent water damage and guard against theft and intrusion.
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