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byDeante' Peake - Licensed Property & Casualty Producer
Deante' Peake - Licensed Property & Casualty Producer
Operations Sales Manager, Property & Casualty
Updated June 21, 2021|7 min read
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It's not uncommon to find out at the end of your policy term that your home insurance rates are going up. The amount you pay in premiums is largely dependent on your home’s location, the age of your home, and your insurance score — so if any of the factors that affect your premiums have changed, that might explain your rate increase.
Rates may also be affected by factors that are completely out of your control, like changes in the insurance industry. When carriers suffer a record-setting number of losses in a given year, that affects the industry’s bottom line, and there’s a good chance the following year’s rates will reflect that — often at the behest of reinsurance companies. In 2018, homeowners insurance premiums saw a 3.1 percent increase nationwide, according to a January 2021 study by the NAIC.
If your rates went up in the last month or year and you’re wondering how that happened, the increase in natural disasters may be part of the reason, but there may be other factors too — and there are things you can do to lower your home insurance rates again.
Insurance rates are going up industry-wide. Average premiums increased 3.1% from 2017 to 2018
If you live in an area of the country that experienced an increase in natural disasters, insurers will likely raise your rates the following year
Insurance rates may increase if your credit score went down, if your home is due for upgrades, or if you filed multiple claims
You can lower your rates by qualifying for discounts, disaster-proofing your home, or reshopping your home insurance
If your rates went up since last month’s bill, or you renewed your policy just to find out that your premium is $300 higher than it was last year, you’re probably asking how that happened. It’s especially perplexing if you have no claim history and your rates had been the same for a number of years, but there are several reasons why this may have happened.
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Your rates are generally determined by the coverage amounts in your policy. Your home’s rebuild cost, or dwelling coverage, is a key determiner of how much you’ll pay in premiums — the higher your dwelling limit, the higher your premiums will be. A key indicator of your home’s rebuild cost is the price of local construction materials and labor, and when construction costs increase, your dwelling limit may need to increase as well.
Construction costs can jump for a variety of reasons — maybe they went up because a number of weather catastrophes increased demand and shortened supply, or maybe a proposed tariff increase caused the spike in construction costs. Be sure to check your policy’s declarations page — your home insurance company is required to inform you before they make any changes to your coverage, but they may not tell you that your rates are about to spike.
Even if you’ve had the same insurance company for five years, you pay your premiums on time, and you never file claims, your insurer may still conduct an inspection on your home when you renew your policy.
Your insurance inspector will likely conduct – at the very least – an exterior inspection of your home, focusing intently on the roof, exterior walls, and your home’s foundation. If your inspector determines that your home’s structure is in bad condition and could use some upgrades, they may give you a specific timeframe to make those updates, typically 30 days. If you don't make the updates to your home, you may see a rate increase on your next bill.
Another factor that determines your home insurance rates is your insurance score, which measures how statistically likely you are to file claims. Carriers typically determine your insurance score by combining various risk factors – like your credit score, your claim history and whether your home has certain safety features or not. The lower your insurance score is, the higher your premiums will be.
Carriers typically assign insurance scores to policyholders during the application process, and will update your score when you’re up for renewal, and may adjust your rates if necessary. Maintaining a healthy credit score (above 700) and not filing claims is a good way to keep your insurance score, and rates, down.
If you have a long and detailed home insurance claims history of relying on your insurer to pay for every minor covered loss to your home, your insurer may quote you a higher premium to pay for all the damages. Conversely, if you’ve never reported any damages and have a clean claims record, your insurer may give you a lower rate.
Your rates are also impacted by how often your neighbors or people in your ZIP code file claims. If you live in a consistently burglarized or storm-ravaged area, it may not matter if you have a clean claims history — if people around you don’t, that may increase your premiums.
Swimming pools, trampolines, and swing sets are all considered “attractive nuisances” in the insurance industry. They’re seen as a safety hazard because of the increased risk of bodily injury. You’ll likely need to increase your liability coverage if you install a pool or trampoline, and an increase in coverage will result in your rates going up.
As we discussed earlier, rates are trending up industry-wide. Sometimes, it’s purely profit-motivated, as stockholders expect a certain return from a company they have shares in. But lately, the increase may be due to the industry’s record-setting claims and losses — ostensibly related to the winter storm, hurricane, and wildfire activity. In 2017, for example, California saw $14 billion in insured losses due to wildfires. In 2020, the Midwest was hit with a Derecho storm, resulting in billions of dollars in property loss.
Your homeowners insurance company is required to tell you if your rates increase. If you noticed something has changed on your bill, like an increase in coverage amounts and higher rates, the first thing you should do is call your insurer and discuss your bill with them. They’ll most likely give you a reason and may suggest tangible ways to get your rates lowered as well as any potential discounts you’re missing out on.
Some reasons your insurer may give you for why your rates went up are out of your control, like an increase in natural disasters. But there are several ways you can lower your premiums if they went up.
If you’ve noticed your rates have gone up recently and you’re wondering if there’s anything you can do about it, you’re not alone, and yes there is. Following the steps listed below is a good starting point, but you can also call and discuss your rate increases with a licensed representative at Policygenius who can help you better understand your bill and get those rates down.
When you look at your policy’s declarations page, you’ll notice a discounts section, and if that section is more or less empty, you should look into potential discount opportunities offered by your insurer. Potential discounts you should expect to see offered are:
Multi-policy discount: If you have two or more policies with the same insurer, like home and auto and life insurance, that can potentially save you anywhere from 20% to 30% on premiums, depending on the insurer
Claim-free discount: Some carriers will offer you discounts for not filing claims
Protective devices discounts: If your home is fitted with deadbolts, smoke detectors, fire extinguishers, and fire and burglar alarms that contact law enforcement directly, most insurers will offer you a nice discount
First-time homebuyer discount: Most insurance companies will offer discounts for new homebuyers
Senior citizens discount: If you’re 55 or 60 and older, your insurer may offer up to 10% off your premiums
Long-term policyholder discount: If you’ve been a policyholder with the same insurer for five years or more, it’s common for insurers to offer 10% loyalty discounts
The lower your policy’s deductible is, the higher your premiums will be, and vice versa. If you’re currently paying a $500 or $1,000 deductible and your rates went up, a good way to get those down is to ask your insurance company about raising your deductible. You only pay your deductible when you file a claim, and if you’re a responsible homeowner who’s never had to file a claim before, then increasing your deductible may be a good option for you.
If you remodel sections of your home, modernize or winterize your home’s electrical and plumbing, or added storm shutters, storm-resistant shingles, or a disaster-resistant garage door to your home, let your insurance company know — they will likely reward you with lower rates.
You should consider reshopping your home insurance every year to make sure you aren’t missing out on a better deal with a different insurance company.
If you can’t find affordable home insurance because you live in a high-risk area, you may be able to buy your policies through government programs, like your state's Fair Access to Insurance Requirements (FAIR) Plan. You may be paying more for government plans than you would if you went through a private insurer, so be sure to check with agents in your area to see if they offer comparable – but more inexpensive – policies.