If it seems like home insurance prices increase every year at renewal, you’re not imagining it. Insurance rates are adjusted on a regular basis to reflect the ever-changing risk landscape.
Over the past decade, the average cost of home insurance increased by 59 percent. So why are prices going up? And what can you do to keep your coverage affordable?
Why Did My Home Insurance Rates Go Up?
A lot of factors determine your premium. Some you can control; others you can’t. These are the 11 reasons home insurance rates increase.
1. You Filed a Claim
Your claims history is the first place to look if your insurance prices go up. Even a small claim can cause significant increases and stay on your record for years. Generally, non-catastrophic claims increase your rates more than claims filed because of natural disasters. That includes things like:
2. Your Insurer Covers Too Many Homes in Your Area
If an insurance company already insures too many homes in your area, it may increase rates to decrease its concentration. Again, spreading out risk helps make sure the company can meet its claims obligations if a widespread disaster strikes and keep prices affordable for homeowners.
3. Your Company Paid Out a Lot of Claims
Insurance uses the law of large numbers to spread risk over many homes and keep the costs down. But when a carrier experiences a year with higher than expected claims, it has to adjust premiums to cover losses and operating costs. For example, if a hurricane hit your community last year, you can probably expect higher rates this year.
Your insurance rates may increase if your limits were adjusted to account for inflation and the cost of rebuilding your home. The national 2019 rate of inflation was 1.81 percent, but your home may see higher or lower rates depending on the construction costs in your area. The more it costs to rebuild your home, the more your insurance will be.
5. You Lost Discounts
Read through your renewed homeowners policy and look for any discounts that might not have been applied. If you didn’t submit proof of safety devices, these discounts may be removed and make your rates go up. That’s easy enough to correct – just contact your provider and submit the discount documentation.
6. You Added a Trampoline or Swimming Pool
In the industry, we lovingly call these “attractive nuisances” – the items in your yard that may attract visitors and cause injuries. Think: swing sets, tree houses, trampolines, swimming pools, and slides. They may even invite trespassers, and unfortunately, you can be held responsible for injuries even your uninvited guests experience.
7. You Made Some Big Home Improvements
Home improvements increase the value of your home, and they also increase how much it would cost to rebuild your home. As you might’ve guessed, that can make premiums go up. That’s especially true if the improvements add square footage or substantially increase the quality of a room, like if you upgrade from particle board cabinets to custom cherrywood cabinets. That’s a big difference in the cost to replace them if you have a claim.
8. You Have Outdated Electrical, Plumbing, and HVAC Systems
If you have an older home, outdated systems can make it more expensive to insure (or hard to insure altogether). Investing in electrical, HVAC, or plumbing upgrades can not only make your home safer, but they may make your homeowners insurance more affordable in the long run.
9. Your Roof Is Getting Old
Your roof protects everything under it. As it gets older, it doesn’t do that job as well. An older roof is more likely to have leaks and experience wind and hurricane damage. It may be time to replace your roof if it has:
- 3-tab or asphalt shingles and is older than 15 years.
- Architectural shingles and is older than 20 years.
- Clay tiles, concrete tiles, slate, or metal and is older than 40 years.
- A flat or shed shape and is older than 10 years.
- Wood shake or shingles or asbestos materials.
- Existing damage.
10. Your Credit Score Dropped
Many states (like Florida) allow insurers to use your credit score to help determine your rates. The better your credit is, the lower your premiums will be. If your credit rating drops, your insurance premium may go up. The good news is that you can raise your score by paying your bills on time and reducing your credit card balance (aim for 30 percent utilization!).
11. You Adopted a Dog
All dogs are good dogs, but some are restricted breeds. If you have a German shepherd, for example, your rates may increase to cover potential bite claims, and those aren’t cheap. Overall, home insurance companies paid nearly $900 million in dog bite claims in 2021.
It can be frustrating to see a slightly higher rate when your policy is up for renewal, but remember: all companies increase prices slightly each year. If you decide to shop around for a new policy, just make sure you’re not sacrificing coverage for a slightly lower price.