Why Did My Home Insurance Go Up? And, What Can I Do?

Are you wondering, “Why did my home insurance go up”? Well, you’re not alone. In 2023, residents across the United States have witnessed a surge in their home insurance costs, with some experiencing hikes of several hundred or even thousands of dollars in specific states.

To be precise, financial experts reported an average increase of about 21% in home insurance premiums.

Dealing with an unexpected spike in insurance costs, especially when you haven’t made any claims, is not only inconvenient but also quite frustrating. Interestingly, it’s not just your claims history that impacts your annual payment in the insurance realm.

Various factors, including inflation, policy adjustments, a challenging market, and even instances of insurance fraud, can all play a role in escalating insurance rates. However, this doesn’t imply that you’re powerless in the face of these circumstances. You can definitely take action to address the situation.

In this guide, we’ll give you the answer to the dreaded question,” Why did my home insurance go up?” What’s more, we’ll try to explore ways to control your growing insurance premiums.

Here are some of the most solid reasons that have led to the homeowners’ insurance rate increases.

Inflation

This is the number one reason why Americans are experiencing a rise in their homeowners insurance premiums. Like everything else, insurance premiums are rising due to increased construction costs and inflation stemming from supply chain issues since 2020. Inflation exerts pressure on the overall cost of living, including the expenses associated with rebuilding and repairing homes. For example, between October 2021 and October 2022, there was a 14.3% increase in material goods for new residential construction, a 6.2% rise in lumber and wood products, and a 14.5% growth in asphalt roofing materials.

This escalation in building costs directly corresponds to an increase in the expenses associated with repairing or replacing homes damaged by covered losses.

As the general price level of goods and services rises over time, the costs of construction materials, skilled labor, and other resources necessary for rebuilding or repairing homes also increase.

This prompts insurers to adjust their rates to reflect the heightened economic environment. Policyholders often experience these adjustments as higher premiums, reflecting the increased financial burden on insurers in the face of inflationary pressures on the construction and labor markets.

Insurance coverage and policy changes

Insurance coverage and policy changes can directly contribute to increased insurance rates. When policyholders make alterations to their coverage, such as expanding coverage limits or adding new features, the perceived risk for the insurer may rise. For instance, home improvements that increase the property’s value can result in higher rebuilding costs, prompting the insurance company to adjust rates accordingly.

Additionally, changes in coverage terms, deductibles, or other policy details can impact the overall risk assessment. Policy changes, such as relocation, home modifications, or aging roofs, can influence insurance premiums. Moreover, adjustments to liability coverage, such as having a swimming pool, trampolines, or pets may increase liability risks, leading to higher insurance rates. The insurers raise premiums to offset the increased risk.

Frequency of natural disasters

Storms, floods, droughts, and wildfires cause a ton of damage. By October 11, 2022, the United States had witnessed 15 weather events that cost more than $1 billion each. When these weather disasters become more common, insurance becomes more expensive.

In regions prone to frequent natural disasters such as hurricanes, wildfires, or floods, insurers face a higher likelihood of having to pay out substantial claims to policyholders. The increased frequency and severity of these events strain the financial resources of insurance companies, prompting them to reassess and readjust their risk assessments. To maintain financial stability and fulfill their commitments to policyholders, insurance companies often find it necessary to raise premiums.

Record-setting claim payouts in cities such as Florida from unexpected weather events lead to financial losses for insurance companies. The rising rates aim to cover losses and prevent bankruptcy after future climate disasters.

Insurance claim history

Your insurance claim history plays a significant role in determining your homeowners’ insurance rates. Insurance companies assess the risk associated with insuring your property, and a history of filed claims can signal a higher level of risk. When you file a claim, the insurer incurs costs to settle it, whether for repairs, replacements, or payouts. Multiple claims within a specific timeframe may suggest a pattern of recurring issues or higher susceptibility to damages. As a result, insurance companies often raise premiums for such individuals. Therefore, maintaining a claims-free history can be a key factor in keeping homeowners insurance rates more affordable.

The average annual cost of home insurance varies based on the number of claims filed. Here’s a breakdown of the national average costs according to the claim history:

For those with 0 claims, the average annual cost is $1,935.
With 1 claim, the average annual cost increases to $2,105.
Individuals with 3 claims face an average annual cost of $2,918.
Those with 5 claims experience a higher average annual cost of $4,409.

Insurance fraud

Insurance fraud contributes to increased insurance rates as it imposes a significant financial burden on insurance companies. When policyholders or even third parties engage in fraudulent activities, such as submitting inflated or false claims, the insurance company ends up paying out more than it should. These fraudulent claims deplete the funds that insurers use to settle legitimate claims and maintain financial stability.

To recoup these losses and ensure solvency, the insurance industry often passes the financial burden onto all policyholders by raising insurance rates.

Individual insurance score

An insurance score is a numerical representation that insurance companies use to assess the risk associated with an individual policyholder. It is derived from a combination of factors, including the policyholder’s credit score, claims history, and other relevant financial criteria. Essentially, the score predicts the likelihood of a policyholder filing future insurance claims. A higher insurance score is generally associated with lower perceived risk. And, as a result, it may lead to lower insurance premiums.

Conversely, a lower insurance score may be interpreted as higher risk, potentially resulting in increased premium costs.

How can you do your bit to keep insurance costs down?

Several factors influencing your home insurance rates may be within your control. Here’s how to combat rising insurance premiums.

Keep a good credit score. A higher credit score is often associated with lower insurance premiums, as it’s considered an indicator of financial responsibility.
Maintain a claims-free history or address small repairs independently. Remember that your past claims can affect your home insurance price.
Invest in effective home security measures. Installing security systems, smoke detectors, and other safety features can lower your risk profile, potentially leading to lower premiums.
Keep your home in great condition by making the right upgrades and through regular home maintenance. Upgrading your home’s infrastructure, such as the roof, plumbing, or electrical systems, can demonstrate proactive maintenance and reduce the likelihood of claims, thus positively impacting your rates.
Manage the potential liabilities on your property, such as ensuring pool safety. It can mitigate risks and contribute to lower insurance costs.
Adjust your deductible – the amount you pay before insurance kicks in. it can impact your premiums. A higher deductible often results in lower premiums, but it means you’ll pay more out of pocket in the event of a claim.
Inquire about available discounts, such as multi-policy discounts (combining home and auto insurance), loyalty discounts, or safety feature discounts.
Regularly review and update your policy with your insurance provider. It’s a good way to ensure that you are not overpaying for coverage you no longer need.
Periodically compare quotes from different insurance providers to explore competitive rates and potentially find more cost-effective coverage.
Have open and clear communication with your insurance company about any changes or improvements to your property. It will ensure that you get the right type of insurance coverage, at the right rate.

What are the insurance predictions for next year?

Homeowners should be ready for their home insurance costs to go up. The recurring extreme weather conditions in the past have made insurance companies increase prices and be more picky about who they cover. A few big insurance companies are pulling back from risky areas. And, this trend is expected to continue, especially in states such as California and Florida. As a result, other insurers might offer more policies to homeowners in high-risk places and charge higher premiums.

So, why did my home insurance go up? Key takeaway

It’s tough for homeowners right now because the insurance market is facing its own challenges. Factors such as extreme weather events, inflation combined with an increase in building material costs, and a shortage of skilled labor are causing insurance rates to go up.

If you too are experiencing these increments, it’s a good idea to reach out to your independent insurance agent. They can explain the reasons behind the changes and offer suggestions on how to potentially lower your rates.

Written by Ramona Sinha. January 7, 2024

Ramona is the Senior Content Writer for Kukun. This experienced blogger uses simple and succinct words to decipher the complex phenomenon called life. She has written articles covering a broad range of topics, such as real estate, lending and mortgage, finance, business, taxation, home designs, home improvement projects, decor concepts, and more. An avid traveler, she’s a digital nomad at heart and an animal lover from the depth of her soul.