We are all dealing with higher prices right now, from the grocery store to the gas pump to just about anything else we purchase in daily life. Inflation has been surging for months, impacting the price of everything we do as consumers. Your home insurance is no exception. A variety of different factors have been converging into the perfect storm, making homeowner insurance rates go up. Although much is beyond individual control, there are several options to pursue to ensure you are getting the best value and that a claim you may have in the future will be covered.
How are homeowner insurance rates determined?
Have you ever wondered how insurance companies set home insurance rates? It all rests on two things: the probability that homeowners will need to file a claim and how much risk is involved in owning a home. Here are the specific factors that come into play, according to Hanover Insurance:
- Amount of coverage needed (how large is your home, how much property do you have, how much “stuff” do you have?)
- Age of the home (older homes may be more expensive to insure)
- Location (some areas are more expensive than others)
- Liability issues (various factors make your home or location more likely to result in a claim)
- Previous claims (do you have a history of making previous claims?)
Sounds pretty straightforward. Nope. It’s not so simple after all. A host of external factors are making a huge impact on insurance rates. These factors (see below) strongly influence prices and the cost to insure a home. Swirling all together, they are causing rate increases across the country.
Why are rates going up now?
“We are seeing homeowner increases between 10% and 20% for clients who have not had claims. Mine went up 21% without reporting any claims.”— Ryan Delp
According to Ryan Delp, senior producer and sales manager at Bradish, “the entire industry is seeing a big jump in the cost of property claims.” The experts all agree that inflation is a primary cause. Rising prices translate into higher costs of living and owning a home. This, in turn, makes insurance rates go up. But what else is causing it? There is plenty of blame to go around, including the pandemic, supply-chain disruptions, geopolitical events, and more.
Hanover has collected a set of widely reported nationwide trends that have been influencing costs:
- More instances of severe weather and natural disasters
- Higher building-materials costs
- Increases in shipping costs and supply-chain disruptions and delays
- Rising cost of labor (much of it owing to labor shortages)
- Larger, more expensive homes
- More fire damage (Hanover cites use of more synthetic materials and open floor plans as two reasons)
- More water damage (claims have been increasing over the past several years)
For all of the above reasons, the cost to insurers to pay out claims has skyrocketed, causing home and property insurance rates to go up as a result, according to Delp. “We are seeing homeowner increases between 10% and 20% for clients who have not had claims. Mine went up 21% without reporting any claims.”
What can we do about it?
Many of the factors influencing rising costs are beyond the control of homeowners, insurance agents and insurance companies. What you can do is call your Bradish agent to brainstorm creative ways to maximize your savings. One solution is to bundle your coverage, such as going with the same insurance carrier for home and auto insurance. Or, ask your agent to review with you your policy’s deductibles, limits and any possible discounts for which you may be eligible.
Another smart move is make sure your assets are protected with enough insurance coverage. Investigate whether your current level of coverage will account for the higher prices to repair or replace your home. Then, if you do need to make an insurance claim, at least you will be covered, and it will have been worth the extra investment. Review your policy every year (starting now), and make changes as needed (inflation will come down again at some point!).
by Kris A. Mainellis