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Why did my homeowners insurance rates go up?
There are several reasons why your rates may have gone up, but there's also no shortage of ways to get those rates back down — learn how.
In order to keep your home insured, your insurance company requires that you pay them monthly or annual premiums. The amount you pay in premiums is largely dependent on your home’s location, the age of your home, and your insurance score.
Rates are also affected by factors that are completely out of your control, like the financial health and solvency of your insurer and the reinsurance companies (your insurance company’s insurer who helps them pay for claims). When carriers suffer a record-setting number of losses in a given year, like they did in 2017, 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.
If your rates went up in the last month or year and you’re wondering how that happened, the horrifically active tropical storm season may be part of the reason, but there are plenty of ways to mitigate the increasing rates.
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If your rates went up since last month’s bill, or you renewed your policy just to find out that your premium is $100 higher than it was last year, you’re probably asking how that happened. It’s especially perplexing if you have virtually no claim history and your rates stayed the same for a number of years but all of a sudden shot up. What gives?
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 agent 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 gone through 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, 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 covered knick and knack 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.
As we discussed earlier, rates are going 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 hurricane activity.
In fact, insured losses totaled almost $102 billion in the U.S. in 2017 alone – more than quadrupling insured losses from 2016 – and $78 billion of that was because of weather catastrophes like hurricanes and severe thunderstorms. If your rates went up in 2018, that may be the reason.
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.
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.
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.
This is especially true if you live in a high-risk coastal area and buy your policies through government programs, like the Texas Windstorm Insurance Association (TWIA) in Texas. 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.
About the author
Pat Howard is an Insurance Editor at Policygenius in New York City, specializing in homeowners insurance. He has been featured on Property Casualty 360, MSN, and more. Pat has a B.A. in journalism from Michigan State University.
Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.
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