According to the Insurance Information Institute (III), home insurance rates have risen by 6.5 percent in the past year. That is the highest increase since 2013 when rates jumped by 8.3 percent. When premiums go up, homeowners notice and look for ways to prevent further proliferation.

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To do that, discover what causes the rates to rise and what steps to take next.

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Home Insurance Rates In Your Area

The average cost for homeowners insurance in 2022 is $1,272, according to Business Insider. Alas, such prices vary depending on the home's location. Rates range from state to state. For instance, the typical annual cost in Nevada is as low as $791, while in Louisiana, it goes up to $2,037. 

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If premiums rise, check your area’s rates to see if the increase is a part of a local trend or something else.  

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How much did your home insurance increase?

Based on many factors, home insurance rates can change. If you have noticed an uptick in the premium, the first step is to determine how much it has increased. In an ideal situation, homeowners maintain the rates they started with. While, over time, that becomes more challenging, staying vigilant is vital to prevent insurance costs from rising. 

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What factors contributed to the increase?

Many factors can affect insurance rates, including the home’s location, age and condition, and the required coverage. Almost 90 percent of homeowners experienced increases between 2021 and 2022. While for a fair share of folks, it is due to the same reason, such as inflation, there’s a list of other factors. 

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Reasons Your Home Insurance May Have Gone Up

Your insurance premium is based on several variables – some under your control, others not. Following are 10 possible reasons for rising house insurance rates.

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Have you made recent changes to your home that could impact the insurance rate?

Insurance companies view “attractive nuisances” on properties as riskier. Examples are swimming pools, trampolines, outdoor playsets, and even household pets. Because these acquisitions can entice children to the property and pose a risk of injury, expect a rise in premiums to balance the increased likelihood of liability claims. 

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Taking precautions to avoid mishaps, like putting up a fence around a pool, might prevent the potential increases. 

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Have there been recent changes to your credit score?

Your insurance score is another crucial factor. While similar to credit ratings, these have the sole purpose of fulfilling insurance needs. Companies base these scores on the probability the insured will file a claim. Along with looking at one’s claims history, companies also consider credit history. 

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Since a lower score often indicates higher premiums, one’s credit is often a culprit. 

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Have you had claims on your home insurance policy?

When rates increase, checking your claims history is a priority. The slightest claim can impact your record for years. Compared to those from natural disasters, non-catastrophic claims result in higher premiums. Examples include house fires, theft, and water damage from a roof leak or busted pipes. 

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Such insurance claims are often among the most expensive for homeowners. Insurers may raise premiums to account for the risk of claims if an inspection reveals subsequent repairs. 

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Do you carry the correct amount of coverage?

The type of home and its value are also important. Larger homes with high square footage and intricate designs are more expensive to insure because they cost more to rebuild. Renovations and repairs improving the home’s quality or adding square footage can also raise the property value, thus, the cost to rebuild.

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Consult with your insurance agent to review recent home improvements and ensure your coverage accounts for these modifications. 

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Has your area experienced inflation?

Inflation increases the costs of rebuilding a home and, therefore, affects premiums. Home repair and replacement expenses often surge quicker than the rate of inflation. 

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Another facet is the heightened prices of construction materials and labor. The cost of lumber and other building equipment has risen due to supply chain issues and record-breaking stints of inflation. Depending on building prices in your area, insurers may increase limits, resulting in higher home insurance rates. 

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Have there been natural disasters in your area?

Areas more susceptible to natural disasters or events such as crime can often cost more to insure. Over the past few years, the home insurance sector has seen record-setting claim payouts and monetary losses due to hurricane seasons and winter storms. Several insurance companies raise prices to cover these costs.

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Is your home in a high-risk area for flooding or wildfires?

Some states experience a greater chance of certain catastrophic events. Affected areas often have higher building and labor costs. Examples of high-risk areas include California residents prone to disastrous wildfires and Florida residents facing the possibility of flooding.

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At-risk areas may experience recurring increases. That is because higher risks and inflation play a role.  

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Are you due for a re-evaluation of your home's insurance needs?

Your home's age is also essential for insurance since venerable properties require more repairs. Long-standing homes with out-of-date equipment can be difficult and expensive to insure. Electrical, HVAC, and plumbing systems can influence rates following an inspection.

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Ask your insurance agent to re-evaluate your policy on a regular basis to ensure proper coverage and consider updating antiquated systems. 

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Were discounts removed from the policy?

Some providers have several rebates for policyholders. They include deals for good credit, bundling policies, and installing security equipment. Examine your homeowner's insurance for possible reductions. Prices might increase if discounts are removed due to poor credit or failing to provide proof of safety equipment purchases. To resolve this, contact the insurance company and submit the necessary documentation.

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Does your insurer cover other homes in your area?

To reduce its concentration, an insurance provider may raise prices if it covers too many properties in the neighborhood. 

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Again, distributing risk lowers costs for homeowners while ensuring that the business can fulfill its claims responsibilities in the event of a major calamity. Re-examine your home insurance policy every so often to receive the best offer.  

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How To Lower Your Home Insurance

Various ways are possible to reduce the cost of insurance. Contact your agent to learn more about why your premiums increase and how to counteract them.  

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The most common methods that can save money are as follows:

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• Bundle your policy
• Check for discounts
• Raise the deductible
• Aim to be “claim-free.”
• Improve your credit score
• Evaluate recent home improvements
• Add home security
• Shop around for lower rates

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What reason did the insurer provide for the rate increase?

Consult with an insurance agent to inquire about the upsurge when your policy is up for renewal. Insurers should supply a reason. Resolving that is an excellent start to lowering the cost. Often, insurers provide recommendations, such as raising the deductible or checking for qualifiable discounts.

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Have you compared rates with other insurers?

Despite companies offering loyalty discounts, comparing quotes from multiple insurers is the best way to see if your current policy is worthwhile. Shopping for insurance has never been easier, with numerous online quotes a click away. Compare rates once a year to ensure you are getting the best deal.

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How To Shop For Home Insurance

Buying a home is a significant challenge, and insurance often gets overlooked. Nevertheless, shopping for a policy is essential. 

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Below are five simple steps on how to buy homeowners insurance:

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1. Determine what needs to be covered
2. Decide on the coverage amount
3. Gather and compare multiple quotes
4. Select an insurance company and customize a policy
5. Finalize the policy and activate the coverage

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For more details on each step of how to shop for home insurance, click here.

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Where do I get my home insurance policy?

Searching online is a great entryway and makes it easy to narrow down which companies suit your needs. Insurance websites often include estimating tools, so finding an insurance policy is effortless. 

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Since homeowners insurance is a significant investment, speaking with a licensed insurance agent is recommended. Agents are specialists and can assist in finding a suitable policy at an excellent price and customize it to suit your requirements.

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Bundling multiple policies is a common way to save money. For instance, using the same company for your home and auto insurance will result in a multi-policy discount.  

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What are the consequences of not having insurance?

While no state or federal laws stipulate that homeowners need insurance, obtaining a mortgage loan is nearly impossible without it. Home loans are considerable investments, which means more risk for the lenders, requiring all borrowers to have a policy. 

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You will be accountable if you choose not to keep the insurance after paying off the mortgage. Repairs and rebuilding costs would come out of your pocket.

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What Home Insurance Covers

A home insurance policy covers the cost of repairing or replacing your house and the interior in the event of damage. While there’s much more coverage than that, all policies differ and are customized with separate endorsements. 

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Typical coverage types include:

• Dwelling coverage
• Personal property coverage
• Detached structure coverage
• Liability coverage 
• Medical payment coverage
• Additional living expense (ALE) coverage

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Who determines if your home is insurable?

Insurance companies set policy rates and coverage limits. Qualifying for homeowners insurance is not as simple as owning a house and affording the premium. Homeowners can be refused policies for several reasons, such as poor credit or too many attractive nuisances.   

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What Home Insurance Doesn’t Cover

Standard policies do not provide comprehensive coverage, and endorsements are often needed. Typical exclusions that require additional policy riders are below:  

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• Flood coverage 
• Earthquake and sinkhole coverage
• Identity theft protection 
• High-value item coverage (i.e., jewelry and artwork)
• Insect damage (i.e., termites)
• Improper maintenance

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Where is my home insurance policy located?

The insurance policy number and other details are on the policy declarations page, a document received during closing. These documents share one’s amount limits for each coverage selected. If unable to find your policy information, contact your insurance agent for a new copy. 

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Home Insurance Deductibles

The sum a homeowner must pay before their insurance covers the remaining costs of a claim is known as the deductible. A deductible is based either on a percentage of the property’s insured value or a fixed amount, between $500 and $2,000 for the average home, but it can be higher.

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Insurance premiums decrease by raising a policy’s deductible. If rate increases become an issue, consider a higher deductible. This approach can be ideal for folks who do not encounter considerable risks or have owned their home without filing a claim.

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Home Insurance Discounts

Ask your insurance provider about savings you may qualify for if the discounts section on the policy’s declarations page is blank. Popular reductions include: 

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• Auto-pay discount: Setting up automatic payments and paperless billing to pay insurance premiums.
• Claim-free discount: Some carriers will provide a deal if you reach specific benchmarks without filing a claim. 
• First-time homebuyer discount: Most home insurance companies give first-time owners a discounted rate. 
• Loyalty discount: Those who have had an insurance policy with the same provider for five years or more may qualify for a discount of up to 10%.
• Multi-policy discount: Bundling multiple policies, such as home or renters insurance with car insurance, with the same company can save policyholders anywhere from 15% to 30% on their premiums.
• Protective device discount: Most insurers offer cheaper rates if the home includes safety precautions like alarm systems, fire extinguishers, deadbolt locks, or other security measures.
• Senior citizen discount: If you're 55 or older, your insurance company may give you up to 10% off. 

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Home Insurance Companies

Homeowner insurance carriers are a key component of the home buying process. These firms underwrite the policies, set the rates, and act as personal agents for clients. While finding fantastic coverage and discounts in a provider is ideal, choosing a trustworthy company to insure your home is essential. 

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Home Insurance Policies

While home insurance policies are liable for sudden price increases, several remedies are available depending on the cause. Get familiar with these money-saving approaches. This insurance is required of anyone taking out a mortgage. Utilizing your policy to where it will deliver the best savings can pay off today and in the long run.

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Reach out to a representative at Wesley Mortgage if you have questions or concerns about your homeowner insurance.

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