If you’re a homeowner, you’ve probably seen your homeowners’ insurance prices rising over the past couple of years.
According to insurance comparison site Insurify, nearly 30% of American homeowners are sweating over rising home insurance rates. And who can blame them? Home insurance prices spiked by 19% last year, averaging an extra $273 per policy. And that’s not all. From 2019 to 2023, rates surged 55%, from $1,108 to $1,723 on average.
Rates are expected to keep climbing. Insurify’s analysis suggests that home premiums will rise by an average of 6% nationwide, jumping from $2,377 to $2,522. In some states, the increase could be as steep as 23%.
So, what’s driving up rates, and what can you do to keep your costs in line? Let’s dive in.
Topics Covered
Why Are Homeowners’ Insurance Rates Rising?
Almost all 50 states are bracing for a rise in home insurance premiums. Only a few—Missouri, North Dakota, South Dakota, Texas, and Washington—might dip slightly.
You’re not alone if you’ve looked at your homeowners’ insurance bill lately and thought, “Why is this getting so expensive?”
These five key factors are the culprits behind these increases.
#1 – Climate Change
Mother Nature isn’t holding back these days. With climate change ramping up, we see more frequent and severe natural disasters such as droughts, floods, hurricanes, and extreme heat. Even though the last couple of Atlantic hurricane seasons have been relatively calm, other factors, like rising sea levels, have contributed to costly insurance claims. These pricey claims inevitably push insurance costs higher for everyone.
#2 – Regional Premiums
Where you live plays a huge role in your insurance rates. High-risk areas—think coastal regions prone to hurricanes or flooding—often require properties to meet stricter construction and safety standards. While these measures help protect against natural disasters, they also drive up homeowners’ replacement costs and premiums.
#3 – Inflation
We’re all feeling the pinch of inflation these days, and the insurance industry is no exception. With record-high inflation levels in 2023 and 2024, insurers face increased expenses, leading to higher premiums. The silver lining? Many experts believe that as inflation stabilizes, so will insurance rates.
#4 – Litigation
Legal battles in the property sector are another factor driving up costs. From third-party litigation financing to so-called “lawsuit abuse,” these legal claims inflate expenses for insurers, which, in turn, gets passed on to homeowners. Without significant changes in tort reform, this trend is likely to continue.
#5 – Reinsurance Market Pressure
Insurance companies rely on reinsurance to manage their risk exposure. But reinsurance costs are skyrocketing with more claims events—thanks to natural disasters, lawsuits, and other issues. Fewer reinsurance options mean reduced capacity, stricter underwriting criteria, and, you guessed it, higher premiums passed on to homeowners.
How Much Is Homeowners’ Insurance? Breaking Down the Costs
Insurance is regulated at the state level, not the federal level. This means that the cost of home insurance can vary widely depending on where you live. States prone to natural disasters like hurricanes, earthquakes, or floods often have higher premiums due to the increased risk.
Mortgage lender requirements are also a factor. If you have a mortgage, your lender will require you to carry a certain amount of home insurance. Depending on your location and lender, you might need additional coverages, such as flood insurance.
Several factors can drastically change your coverage and cost:
- The Condition of Your Home
- Age of Your Home
- Building Materials
- Square Footage
- Rebuild/Replacement Costs
- Additional Risks on Your Property
- Location
- If You Own or Finance
- Previous Homeowners Insurance Claims
- Level of Coverage
- Deductibles
- Credit Score
So, what does homeowners’ insurance cost?
According to rate data from Quadrant Information Services, the national average for homeowners insurance is $2,230 per year—that’s about $186 per month—for a policy with $300,000 in dwelling coverage. However, insurance is not a one-size-fits-all approach, and several factors determine how much you’ll pay.
However, since every homeowner’s situation is different, it’s critical to talk to a local insurance expert to get the right coverage for your needs tailored to your specific situation. What works for one homeowner might not work for another.
How to Reduce Your Homeowners’ Insurance Costs
Are you feeling the pinch of rising homeowners’ insurance premiums? Here’s how you can cut down on those costs and still keep your home protected.
#1 – Read Our Blog Post
Check out our detailed blog post on 11 Ways to Lower Homeowners’ Insurance Rates. It’s packed with practical tips and tricks to help you start your savings journey.
#2 – Keep Your Property Well-Maintained
A well-maintained home is less risky for insurers. Regular roof inspections, gutter cleaning, and annual appliance servicing can make a big difference. Consider wind-resistant features like hurricane shutters if you’re in a coastal area. Those in wildfire-prone regions should invest in wildfire-resistant landscaping and ember-resistant vents. If floods are a consideration in your area, talk to your local agent.
#3 – Upgrade to Reduce Risks
Consider installing storm shutters, sprinkler systems, or other risk mitigation features. These upgrades can protect your home and may qualify you for premium discounts or better coverage options.
#4 – Bundle Your Insurance Policies
Bundling your homeowners and auto insurance with the same company can lead to significant savings. This strategy can help you stretch your budget while ensuring comprehensive coverage for your biggest assets—your home and car.
#5 – Understand Coverage Requirements
While it might be tempting to skimp on coverage to save money, consider the potential financial devastation from a catastrophic event. Ensure you have adequate coverage, even if it means adjusting your budget elsewhere.
#6 – Prepare for Premium Increases and Higher Deductibles
Unfortunately, premium increases will likely continue due to the rise in catastrophic events. While inflation might cool down, don’t expect premium hikes to disappear entirely. However, the increases might not be as steep as in 2023.
Pro Tip: Speak to a qualified insurance advisor. A knowledgeable advisor can help you navigate rising premiums, understand your coverage needs, and find the best options for your budget.
#7 – Advice for Aspiring Homeowners
Be proactive! Talk to your insurance advisor early to discuss potential insurance obstacles. Having a clear understanding of your coverage needs and budget before house hunting can make the process considerably smoother.
#8 – Understand the Insurance Hard Market
The current property insurance market is tough. Rising premiums, restricted coverage, and limited capacity are hallmarks of a “hard market.” Natural disasters, economic factors, and societal events contribute to this challenging landscape.
But knowledge is power, and familiarizing yourself with the concept of a hard market and how it might impact your coverage can help you prepare if you’re faced with higher premiums, stricter deductibles, and potential exclusions depending on your location and property.
#9 – Changes in Home Insurance Policies
Are you renewing your insurance in 2024? Expect surprises. Coverage terms, limits, sub-limits, deductibles, and exclusions can all change. Carefully review your renewal documents, and don’t hesitate to ask questions. Look out for deductible increases and exclusions for specific losses, like wildfires or floods.
Don’t be a passive passenger. Proactively manage your coverage renewal. Understand the changes, compare them to your needs, and explore alternative options if necessary. Work closely with your insurance advisor to find the best fit for your budget and risk profile.
Final Thoughts
Rising home insurance rates can feel like an unwelcome storm cloud, but with the right strategies, you can weather it. Remember, knowledge and proactive planning are your best tools. Keep your property well-maintained, consider risk-reducing upgrades, and explore bundling your insurance policies. Stay informed about changes in the insurance market, and always consult a knowledgeable advisor to tailor your coverage to your specific needs.
Insurance costs may be climbing, but with these tips, you can take control of your homeowners’ insurance and keep your budget intact.
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*Disclaimer: We offer content for informational purposes; Co-operative Insurance Companies may not provide all the services or products listed here. Please get in touch with your local agent to learn how we can help with your insurance needs.
Sources
Bankrate. Average homeowners insurance cost in July 2024. https://www.bankrate.com/insurance/homeowners-insurance/homeowners-insurance-cost/
Experian. 10 Factors That Impact the Cost of Homeowners Insurance. https://www.experian.com/blogs/ask-experian/factors-that-impact-homeowners-insurance-costs/
Insurance Business Mag. Rising home insurance rates predicted in 2024. https://www.insurancebusinessmag.com/us/guides/rising-home-insurance-rates-predicted-in-2024-483555.aspx
Liberty. Your Guide to Home Insurance in 2024: Top 7 Trends & Strategies. https://libertycompany.com/news/home-insurance/2024-top-7-trends-strategies/
Matic.com. 2024 Home Insurance Predictions: Product Availability, Pricing To Continue Impacting Homeowners and Mortgage Lenders. https://matic.com/blog/2024-home-insurance-predictions/
USA Today. Homeowner’s insurance quotes are rising fast. Here are tips for buyers and owners to cope. https://www.usatoday.com/story/money/personalfinance/2024/05/23/homeowners-insurance-costs-surge/73791022007/
US Risk. Trends in the U.S. Property Insurance Market. https://www.usrisk.com/insights/7-15-24-trends-in-the-u-s-property-insurance-market/