Why Has My Homeowner’s Insurance Premium Increased?

The Main Reasons

Property Values

First, property values make a difference. It makes intuitive sense that a $400,000 home costs less to insure than a $500,000 home. And when property values skyrocketed over the last year or two, no one complained about their $400,000 home becoming a $500,000 home. But this home value increase means that when your homeowner’s insurance renewed, the higher home value was a component of the premium increase. So once people understand this dynamic, they are generally okay with the increase because it means they are insuring a more valuable asset.

Replacement Costs

Second, the replacement costs have skyrocketed. This is the part that customers generally don’t like, but it is one of the most important parts of the policy. A properly calculated replacement cost means that if your home should burn down, another exactly like it could be rebuilt. It would be an awful thing to pay for a policy that only rebuilt half your home because the replacement cost was not updated! So as the cost of labor and materials have gone up, the cost to replace your home has gone up and the insurance company has to raise their prices to cover that cost.

Replacement cost is always changing, and there are a few ways you can check to see how much it would cost to completely replace your home. The first is you can call us to get an accurate quote using our Replacement Cost Estimator. This method is completely free to you, and we are happy to be of service. If you are more of a DIY-er, you can easily use DwellingCost’s tool (click here). While this is a paid service, it will provide you with up-to-date info that industry professionals are using for their own calculations.

Claims Made

Third, in addition to your own claims experience, insurance is priced by the claims in the state and the zip code. So if you live in a state with a small population and a large percentage of the population has had claims, insurance becomes more expensive. Additionally, if you live in a zip code that experiences more claims than other zip codes in your state, your insurance will become more expensive. So as property values rise and replacement costs increase, if there is an outsized increase in the number of claims in either your state or zip code (or both!), your premium will increase.

What Can You Do?

The knee jerk reaction is to start shopping other carriers to see whose insurance is cheaper, but this is a mistake for (at least) two reasons:

• Coverages – when you shop your insurance at another company, it is incredibly common for that company to strip critical coverages (like liability!) in order to make their policy look as cheap as possible. Their interest is in winning your business, not necessarily giving you the best coverage possible.
• Discounts – there are often discounts that can be applied to your policy that can dramatically change the premium. These discounts may not have been available or applicable when you initially started your policy, so doing a policy review can frequently save you some dollars. If, however, you move your policy to another company, you may lose the ability to apply these discounts should you come back in 6 months or a year.

Next Steps

If you don’t have an agent, or your current agent has never offered to do a policy review, or you suspect your policy doesn’t cover everything it should, give us a call. We have excellent staff that know how to set up a policy, work to regularly keep it up to date, and if there are any issues, can service them immediately. Don’t hesitate to give us a call!