Why Have My Home Insurance Rates Gone Up?
The average homeowner will likely see an increase in their home insurance rates this year. Several factors, many beyond consumer control, are behind the rising rates.
One of the most frequent questions the Simon Insurance Agency team gets asked lately is, “Why did my homeowners insurance cost increase?” Sometimes followed by, “nothing has changed since my last renewal, “my neighbor is paying less then me”, “my house isn’t worth that much”, or “I haven’t had any claims.”
While some of these things may be the case a multitude of factors go into the pricing of a individual’s homeowner’s policy, and many of these factors are out of your control, as well as your agent’s. Here are some of the reasons according to Hanover (Citizens) Insurance Group. https://www.hanover.com/resources/tips-individuals-and-businesses/prepare-now-learn-how/why-are-home-insurance-costs-rising “Rates are determined by the likelihood of a homeowner filing a claim and the potential risks involved. Home insurance rates are driven by numerous standard factors, including, amount of coverage needed, age of the home, location, liability issues, and previous claims.” The characteristics of a house- it’s size, location, construction and overall condition will affect the cost. For example: Take the rebuild/replacement cost value of your house. How much it would cost in labor and materials to clean up debris and completely rebuild or replace your house in the event of a total loss? If your house is older and built with harder-to-find materials, the replacement cost value may be higher than that of a new build.
It must also be understood that market value is different from replacement value.
Market value is what a buyer is willing to pay for a home. Replacement cost refers to the amount it would take to completely rebuild a home at the current price of labor and materials.
There are other factors caused by national trends which can also affect rates. One of the biggest causes of current rates going up is the rise in inflation.
The Rising Costs of Goods- Inflation is effecting prices in a lot of industries and insurance is no exception.
As stated by Safeco Insurance, a Liberty Mutual Company, https://www.safeco.com/customer-inflation “Together we’re facing an unexpected and challenging time, and the impact we’re experiencing from inflation is no exception. From grocery bills to entertainment, you’ve probably noticed things cost a bit more than they used to.”
Reasons why prices are being affected by overall inflation.
1. Prices: For the material needed to build a home have increased. Home insurance rates are decided on how much “dwelling coverage” is within your policy. Dwelling coverage is the part of your insurance that pays to rebuild the damaged parts of your home. With the price of building materials, such as drywall, shingles, lumber and copper wiring, up an average of 26%, homes have become more expensive to fix and replace. According to a survey completed by the National Association of Home Builders, this is the largest single year increase in the survey’s history.
2. Labor Shortage: With the construction industry experiencing such a shortage of workers, as well as a high increased demand, this causes all prices in construction to increase. Even if there is not a shortage of material that is needed to make these repairs, there are not enough willing workers who will occupy these kinds of jobs.
3. Severe Weather: From windstorms to hail events, extensive freezing spells and torrential rains, most of the country is experiencing more frequent and more extreme weather events that lead to more damage and higher overall insurance costs. According to private banking firm S&P Global, homeowners insurance costs increased by nearly 11% between 2021 and 2022 joining the list of necessary services hit by inflation. Industry experts predict a possible additional 9% increase in 2023. https://www.themortgagenote.org/homeowners-face-rising-insurance-rates-in-2023/ “It is costing more and taking longer to repair your home, increasing the average cost per claim and ultimately the cost of homeowners insurance for everyone.” said Colleen Finn, managing director of home product management at Plymouth Rock, a Boston based insurer.
So What Can You Do To Manage the Rising Costs of Your Homeowners Policy?
Start by working with an with an independent agency, like Simon Insurance. We partner with over 15 companies allowing our agents to offer you multiple quotes to choose from based on your individual coverage needs. Remember the cost factors listed above, and more, vary for every home and every homeowner. It is rare that any two situations are alike. Therefore it is necessary we take the time to review your specific needs and tailor your coverage.
Our customer service doesn’t end there! We will check in with you each year before your home policy renewal and offer you a risk review. The review will help make any necessary changes, updates, or additions to your policy/coverages. As well as review any possible discounts that may be available to you at the time.
Here is the link to our service center.
https://simon-insurance.com/service-center/policy-review/#andrewm
