Home insurance prices are rising even faster than inflation

Costs are up nationwide since last year, with homeowners in some states seeing their premiums rising at more than double the rate of inflation, according to the 2022 Policygenius Home Insurance Pricing Report.

Pat Howard 1600

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Pat Howard

Pat Howard

Managing Editor & Licensed Home Insurance Expert

Pat Howard is a managing editor and licensed home insurance agent at Policygenius, where he specializes in homeowners insurance. His work and expertise has been featured in MarketWatch, Real Simple, Fox Business, VentureBeat, This Old House, Investopedia, Fatherly, Lifehacker, Better Homes & Garden, Property Casualty 360, and elsewhere.

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Homeowners insurance prices continue to climb in the United States amid skyrocketing inflation and natural disasters, with premiums up 12.1% compared to a year ago, according to a Policygenius analysis of internal policyholder data. 

From May 2021 to May 2022, 90% of homeowners saw their quoted annual premium increase compared to the previous year. For homeowners whose premiums went up, the average increase was $134.

Key findings

  • In some states, home insurance costs have increased at more than double the rate of inflation. Over the past 12 months, home insurance premiums are up as much as 18.5% in Arkansas, 18.1% in Washington, and 17.5% in Colorado, more than doubling the rise of inflation during that same period.

  • The Sooner State is seeing the largest increases. Since last year, homeowners insurance premiums in Oklahoma are up $257 on average — the highest of any state.

  • The Empire State saw the smallest increases. Homeowners in New York saw the lowest increases at renewal since last year, with an average premium hike of just $56.

Home insurance rates are rising faster than inflation in many states

From May 2021 to May 2022, the price of goods and services increased by 8.6% in the U.S. — the largest 12-month increase in over 40 years, according to the Bureau of Labor Statistics. [1]  

In the same time period, home insurance costs in all but one of the states we analyzed have either kept pace with or increased faster than inflation, with 13 states seeing an average rate increase over 50% higher than the current inflation rate and 3 states seeing increases more than double the rate of inflation.

Arkansas saw the highest percentage rate increase at 18.5%, as policyholder premiums went up an average of $228 at policy renewal. The Arkansas Insurance Department has approved six companies for rate increases higher than 10% since the beginning of the year. [2]  

Washington state saw the second highest rate hike, with an average percentage increase of 18.1%. This increase comes after a ruling from the Washington Insurance Commissioner that temporarily banned insurance companies from factoring credit scores into rates, which in the short term, at least, led to most homeowners seeing higher rates. [3]

Texas and Colorado also saw steep rate increases over the last 12 months, while Oklahoma had both the highest average annual premium and average premium increase of any state. Homeowners in these areas of the country face the compounding effects of higher rebuild costs in the wake of natural disasters — an occurrence that experts refer to as “demand surge” — combined with sustained supply-driven inflation. [4]

New York saw the lowest premium increases

New York saw the lowest rate increase at 8%, making it the only state with a rate increase lower than the inflation rate. Inflation hasn’t risen as drastically in the New York City Metropolitan area as it has for the rest of the country, which may explain the lower rate of increase. [5]

Why homeowners insurance is more expensive in 2022

Home insurance rates have climbed the last year in large part because of record-high inflation and more frequent (and costly) natural disasters

Homeowners insurance coverage limits are primarily based on how much it costs to rebuild a house. As construction costs continue to skyrocket due to delayed shipments and labor shortages, so too do home replacement costs. And this has a significant impact on homeowners insurance rates. 

Premiums are also skyrocketing in certain areas due to increasingly violent natural disasters. As we approach yet another hurricane season that experts predict will have “above average” storm activity, many home insurance providers are increasing rates to account for anticipated losses and pass some of these costs onto policyholders.

Here are the main reasons why home insurance rates have seen a sharp increase since last year.

Rising inflation

Your home’s dwelling coverage limit is based on the cost to rebuild, including the cost of lumber, roofing, and other raw materials. Ongoing supply chain issues have pushed the price of construction materials up roughly 36% since the start of the pandemic, according to the National Association of Home Builders (NAHB). This has caused both home prices and insurance rates to skyrocket. 

Severe natural disasters

Climate change has increased both the length and severity of the hurricane and wildfire seasons in the U.S., causing many insurance companies to increase rates or stop offering coverage in high-risk areas altogether. When there’s fewer companies doing business in a particular area, the ones left are forced to establish stricter underwriting rules and increase rates on new and existing customers.

Record catastrophe losses

There were 97 natural disasters resulting in $92 billion in insured losses in 2021, according to the Insurance Information Institute (III). This is up from 92 events totaling $74 billion in losses in 2020. As a result, insurers have had to increase rates to account for higher reconstruction costs in affected areas, and to make up for the record losses.

Labor shortages

Rising rebuild costs are in part due to the labor shortage currently plaguing the construction industry. A recent NAHB survey found that 76% of builders reported a labor shortage in October 2021, an all-time record and up from the previous peak of 65% in 2018. This shortage has collided with a heightened rebuild demand in recent years due to increased natural disasters, sending insurance premiums skyward.

Lawsuits

In 2021, there were over 116,000 lawsuits filed against home insurance companies in Florida over fraudulent roof repair claims. The losses stemming from these lawsuits have crippled the insurance industry in Florida, forcing many providers to increase rates significantly. 

 

What homeowners can do about rising insurance costs

While it may be tough for homeowners in certain states to avoid a rate increase in 2022, there are several ways to get those premiums back down.  

Change home insurance companies

Homeowners should aim to re-shop their home insurance each year to make sure they aren’t missing out on more affordable or better coverage with a different provider. 

Bundle home and auto insurance policies

Many major insurance companies offer homeowners anywhere from 15% to 30% off their home and auto insurance policies if they bundle the two under a single policy package. 

Ask about policy discounts

Many insurance companies offer discounts to homeowners who take steps to make their home safer, as this reduces their chances of having to file a claim. Adding a security system or smart home device to your home, installing a new roof, or fitting your home with any other protective devices can all net you a substantial discount.  

Consider a higher deductible

Opting for a higher policy deductible is one of the easiest ways for homeowners to lower their home insurance rates. If you’re at fairly low risk of claims or you’ve never had to file one in the past, consider increasing your home insurance deductible.

Inflation-proof your coverage

In addition to higher premiums, inflation and rising rebuild costs could also be leaving your house underinsured. This means you may not have enough insurance to pay for a full rebuild in the event of a disaster. In light of rising inflation, it’s important to review your insurance policy at least once per year to ensure your dwelling coverage is at or above your home’s replacement cost. 

Here are a few things you’ll want to check for or consider adding to your policy.

  • Inflation guard coverage: This automatically increases your dwelling coverage limit each year to account for rising construction costs. However, during periods of extreme inflation, these adjustments may not account for future increases, so make sure to review your limits. If you’re not sure whether your policy has inflation protection, ask your insurance agent.

  • Ordinance or law coverage: Increases your policy’s dwelling coverage limit to comply with local building codes. This coverage is especially important for homeowners in Florida, a state where residents are often required to demolish and completely rebuild properties that are more than 50% damaged.

  • Extended replacement cost coverage: Increases your policy’s dwelling coverage limit an additional percentage amount (usually 25% or 50%) in the event rebuild costs skyrocket after a natural disaster. 

Methodology

Average premium increases are based on internal Policygenius data for 8,698 active home insurance policies quoted for renewal from May 20, 2021 to May 20, 2022. The percentage change in each state reflects the average difference between the original premium and the insurance carrier’s quoted renewal premium for each individual policy (final renewal premium for each policyholder may differ from the quoted premium due to policy or carrier changes).

Our analysis was limited to the 25 states for which we had a statistically significant number of policies, meaning a large enough sample size relative to the overall population in that state. If a statistically significant state had outliers, or policy premiums that were abnormally higher or lower than the main cluster of values, those policies were not included in this analysis. 

Image: Kelsey Louise Tyler

References

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Policygenius uses external sources, including government data, industry studies, and reputable news organizations to supplement proprietary marketplace data and internal expertise. Learn more about how we use and vet external sources as part of our

editorial standards.
  1. U.S. Bureau of Labor Statistics

    . "

    Consumer prices up 8.6 percent over year ended May 2022

    ." Accessed June 28, 2022.

  2. Arkansas Insurance Department

    . "

    Compliance Filings for Rate Changes

    ." Accessed June 27, 2022.

  3. Office of the Insurance Commissioner Washington State

    . "

    Credit scoring ban

    ." Accessed June 27, 2022.

  4. American Property Casualty Insurance Association

    (Upon clicking the link, a PDF of the cited report will download automatically). "

    Property Insurers Challenged by Skyrocketing Inflation and Natural Disasters

    ." Accessed June 27, 2022.

  5. Office of the New York State Comptroller

    . "

    Inflation in the New York City Metropolitan Area

    ." Accessed June 28, 2022.

Author

Managing Editor & Licensed Home Insurance Expert

Pat Howard

Managing Editor & Licensed Home Insurance Expert

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Pat Howard is a managing editor and licensed home insurance agent at Policygenius, where he specializes in homeowners insurance. His work and expertise has been featured in MarketWatch, Real Simple, Fox Business, VentureBeat, This Old House, Investopedia, Fatherly, Lifehacker, Better Homes & Garden, Property Casualty 360, and elsewhere.

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