You just received your annual home insurance renewal notice and you’re a little shocked — your premium has increased since last year.
What caused the sudden increase? The short answer: it’s not uncommon to see an increase in your homeowners insurance policy premium. The reason behind the increase could be due to any number of factors; some of which could be either in or entirely out of your control.
Read on to learn potential reasons why your homeowners insurance increased.
3 FACTORS WITHIN YOUR CONTROL THAT CAUSE INSURANCE PREMIUMS TO INCREASE
1. Filing Claims
Often, after making a claim — or more specifically, multiple claims — you’ll see your home insurance premium increase as a result of losing claim free discounts.
Insurance companies are able to offer those customers without a claims history better rates, as they never claim against the policy.
This is why some homeowners choose to forego making smaller claims, simply paying for repairs out of pocket. If you’re considering making a claim, you can always rely on your insurance agent — they’ll be able to tell you if any repercussions will come due to a claim.
2. Changes To Your Property
If you make improvements, like adding an addition on your home or major updates to your kitchen or bathroom, you’ll likely see an increase on the estimated rebuild cost per square foot. Since your homeowners insurance is based on the value of your property, it stands to reason that if you make improvements or changes, it could alter your insurance premium since your coverage needs increasing.
3. Decrease in Insurance/Credit Score
Insurance companies use a number of factors to determine your creditworthiness — or how likely it is that you’ll pay your premium on time. Your credit score is one such factor. When there is a decrease in your credit and/or insurance scores, you’ll likely see an increase in your home insurance premium. Do your best to keep all accounts in good standing and pay on-time to ensure your scores stay high.
4 FACTORS OUT OF YOUR CONTROL THAT CAUSE INSURANCE PREMIUMS TO INCREASE
1. Inflation
Inflation doesn’t just affect product pricing, it also affects things like your home insurance; so as the pricing on appliances and household wares increases, so will homeowners insurance rates.
The insurance industry uses the Consumer Price Index to measure inflation and adjust rates, so this could be a simple reason why your insurance premium increases even though you haven’t changed a thing in your home.
2. Natural Disasters
As you can imagine, natural disasters like hail, wildfires, tornadoes, and hurricanes call for additional home insurance in certain regions. As weather changes and natural disasters begin to increase in your area, it will mean more risk to your property and, therefore, increase your insurance premiums.
3. Aging Home
The older your home gets, the more likely it is to need replacements or have damage. Major systems (like your HVAC and electrical system) or structural components (like your roof and foundation) have had more natural wear and tear over time and will be more easily damaged in the event of a disaster.
With added risk, your insurance premium will increase to cover the cost of fixtures and features that would need replacement upon any covered incident.
4. Local Construction Costs
Part of the way insurance carriers calculate your premium and costs is by estimating the cost to rebuild your home should there be a total loss.
When an area is devastated by a natural disaster, it’s not only your home that will need to be rebuilt; other homes in the area also need laborers and materials to be rebuilt or replaced. When demand is high, constructions costs may increase — as will your insurance premium.
5 TIPS TO ACQUIRE BETTER HOME INSURANCE RATES
Now that you have a better sense of why your homeowners insurance premium could increase, you’re likely wondering how you can secure the best rate possible. Here are 5 tips to help improve your chances for a better home insurance premium.
- Look for discounts: One of the first ways you can secure a great rate is by searching for discounts. Some carriers will offer different savings incentives like paying on time consistently, not making claims, or being a long-time policy holder.
Other companies might have customer-specific discounts like senior citizen or first time home buyer discounts. Many carriers will offer multi-policy discounts, where you’ll receive incentives to carry multiple policies (like both auto and home insurance with the same company). - Incorporate technology: Installing smart devices in your home — such as smoke alarms and security alarms — can be a helpful proactive measure to lower your insurance premium.
- Make updates: If you choose to make updates to your home, such as replacing the roof or other old, failing structures or systems, you’ll likely receive better insurance rates. Similarly, proactive updates like installing hurricane shutters or winterizing your plumbing can also result in savings.
- Opt for a higher deductible: The higher the deductible on your policy, the more money you’ll save on your monthly or annual premium. However, that means that if a covered disaster does occur, you’ll be responsible for paying that deductible amount out of pocket.
- Shop around: When you work with a trustworthy home insurance broker, one of the benefits is the ability to acquire quotes for multiple providers. You can repeat this process annually to ensure your insurance premium and policy is still the best fit for your home and budget.
Now you know the factors in and out of your control that will increase home insurance premiums, along with tips for acquiring better rates. Follow the tips to secure the best rates possible for your homeowners insurance.
And if you need help finding the best homeowners insurance coverage for the best price, start by speaking to a SimplyIOA agent at 833.872.4467 or get a homeowners insurance quote online now.
