Why Did Your Homeowners Insurance Go Up?

You finally receive that homeowner’s insurance renewal notice. But the figures are significantly higher. Certainly not amusing. How did this change occur? What factors could have contributed to this? While getting a homeowners insurance policy is one of the most important decisions you can make, higher premiums can discourage homeowners from taking up an insurance policy, especially if they barely make any claims. Your homeowner’s insurance policy is reviewed annually.

Why did home insurance go up? 

1. Inflation

If you compare the cost of any product or service from 10 years ago, you will notice a significant increase. For instance, the cost of most home appliances has doubled compared to a decade ago. On most occasions, inflation is to blame. This is the same case for homeowner’s insurance. The cost of premiums can not be similar to what you were remitting three years ago. However, even with inflation, the insurance rates should align with the Consumer Price Index. This prevents homeowners from being unfairly overcharged. 

2. Your home has aged

Old homes are more expensive to insure since they are more vulnerable to damage. For instance, after three years of having a homeowners insurance policy, you will notice significant changes in the policy. Plumbing, electrical and HVAC systems are more prone to breakdown as well as dangers such as fire. Also, your home’s structural components such as the foundation, roof and other main features are more prone to weather damage. To cover the risk, your home insurance will be more expensive. 

3. Rise of natural disasters

Natural disasters are just that. Natural. What does this mean? This means that they cannot be predicted or controlled. If your home area is now experiencing more issues of hurricanes, flooding, tornadoes and flooding, the cost of your homeowner’s policy will rise. This is because these environmental conditions pose a higher risk to the insurer. 

4. Improvement of home amenities

Did you just build a new swimming pool? Or bought a trampoline that the kids adore? While additions to your home improve the outlook, value and functionality of a home, they may raise the cost of your homeowner’s insurance policy. You may also have made significant investments in your kitchen. Since it will cost more to replace the items compared to what you had earlier on, your insurer will be left with no choice but to raise the cost of the policy. 

Attractive nuisances such as backyard playsets, swimming pools or trampolines pose a higher risk to homes. If someone hurts themselves while playing on the trampoline or swimming, the homeowner’s insurance should cater for these, hence the increase in cost. However, undertaking safety measures around the new features could bring the cost of the insurance down. For instance, if you have a swimming pool, constructing a safety fence around it can help reduce the insurance cost. 

5. You have made too many claims

Insurance safeguards us from unexpected perils. However, making claims can increase the cost of your homeowner’s policy. However, there are exceptions to raising the cost of your policy based on the number of claims made. 

The cost of your policy will depend on:

• The type of claims made- Claims such as theft that arises from insecurity in your location could mean that insecurity is a problem, hence raising the cost of the premiums. 

• The extent of damage reported- Take, for instance, a home fire. If the extent of damage was high, your premiums will automatically rise. However, setting up fire protection measures can bring the cost down. 

• Your location- If you are located in an area that is more prone to certain risks, the insurance cost will go up. For example, given the risks involved, areas that become more prone to environmental conditions such as hurricanes and floods will become more expensive to insure. 

6. History of claims

How many claims have you made in the past year? Making too many claims could imply that your home is more prone to risks. This ultimately increases the cost of your homeowner’s policy. 

The rise in the cost of homeowners insurance may not be permanent. While this depends on your insurer, most claims stay on record for approximately five years. After the recording period, your premiums could be cheaper, although they may not return to the original rate. 

7. Your credit score

Your credit score is one of the factors used to determine your homeowners’ insurance premiums. It is used in the calculation of your likelihood to claim during the period covered. A drop in your score could see your premiums rise since it is used to build your auto insurance score. 

8. High construction costs

In instances where a home is impacted by environmental conditions such as hail, the only option could be major replacements or rebuilding the entire structure. If the catastrophic event occurred in one location, most homes may be affected, raising the cost of building materials not forgetting the expensive labour. The high cost of construction materials can affect the home insurance cost. 

Unhappy with the high cost of your homeowner’s insurance policy? You can take various actions to remit lower premiums while still protecting yourself against the insured perils.

Here are some ways in which you can reduce the cost of your home insurance:

• Raise your deductible- Increasing your deductible is a smart way to save on your homeowners’ insurance premiums. This is a plus for people who barely make any claims. Persons who make claims regularly may end up paying more since they will be responsible for remitting the deductible amount with every claim made.  Before you settle on this, ensure you get all the relevant information from your insurance agent. 

• Smart home technology- Evading risks have become easier with the recent technology advancements. Not only does smart home technology reduce your homeowners’ insurance cost but also protects you from accidents, some of which can be fatal. For instance, getting sensors that alert you in case of temperature changes, water leaks, unauthorized opening of windows or doors as well as smoke alarms can reduce your homeowners’ insurance premiums. 

• Take advantage of insurance discounts- Most people lose the chance to remit lower premiums since they do not enquire about discounts. You will be surprised by the number of discounts you can get. And this starts with a simple inquiry. 

Shop around for an insurer with better rates- Insurance companies have different pricing strategies. As such, one insurance provider may charge you significantly higher for a similar service. Getting different quotes before settling on one provider goes a long way in getting better homeowners’ insurance rates.