May 14, 2024

Why Homeowners Insurance Rates Are Going Higher

homeowners insurance quotes

The Rising Tide of Home Insurance Costs: Unpacking the Increase in Premiums

How to keep your insurance rates from burning you.

Insurance premiums for homeowner's insurance are under attack and coming after your budget.

Have you seen a dramatic rise in your home insurance premium in recent years?

People call our offices daily looking for lower homeowner's insurance after a HUGE rate increase from their current insurance company.

How can I get my homeowner's insurance cost lower?

Simple tips to get your budget back under control.

Home insurance in the past was a cheap loss-leader for the more profitable auto insurance policies insurance companies craved. Just a few years ago in the Midwest, you could buy an average home policy with standard coverages for around $500-$600 a year. But today, you’d be hard-pressed to find any carrier willing to charge less than a $2,000 annual premium.

Sure, you can still get cheap $300-$400 homeowner's insurance in Arizona and California or many other parts of the Southwest, which don’t have nearly as many weather-related claims. But, it doesn’t stop carriers from spreading their financial risk around the country to minimize overall exposures. You’ve heard the saying “The Law of Large Numbers” clearly applies to the insurance industry passing on rate increases in areas not normally at high risk of claims.

Why are homeowner's insurance premiums rising?

The simplest answer is weather-related claims.

Weather in the past 15 years has been a major problem for insurance companies who spend millions a year monitoring and trying to predict climate change. We’ve seen some carriers pull out of coastal communities, including New York and New Jersey, after a hundred years of insuring homes and families. Florida is void of any national insurance carrier other than for renters, or condo insurance (the reason is they are covering your contents and not the building).

Weather related insurance claims

From Texas to Colorado to Ohio to Florida and beyond, we are seeing both small and large weather-related claims. In Missouri, where Insurance Brokers Group is located, we see homeowners file a claim for a new roof on average every ten years because of weather-related claims. Gone were the days of people buying a new roof because of old age.  $10,000 roofs in the past, today now cost $20,000 and $25,000. Home insurance carriers have also gone to higher mandatory deductibles for wind and hail. It was recently brought to my attention that AAA switched their customers at renewal or new customers with a 1% deductible and actual cash value (ACV) on the roof to reduce the financial exposure.

Let’s look at simple wind or hail damage claim

Quick example of how that would work for a $200,000 homeowner with AAA insurance and many other carriers. $200k x 1% = $2,000 with a roof replacement cost of $10,000 and the roof is, let’s say, 10 years old. A typical roof has a 20-year life span which translates to 50% of the life. $10,000 roof (–) remaining life expectancy = $5,000 + $2,000 (1% deductible) = $7,000 total deductible for a new roof. The insurance carrier will basically write a check for $3000 and the rest is up to the homeowner or $7,000.

What can you do to get your homeowner's insurance premiums Lower?

best home insurance rates near me

Our best advice is to shop around for a carry that has not been impacted by weather related claims and forced to raise everyone’s homeowner's insurance policy.

What are the best ways to shop for better or lower home insurance rates?

Not only is it a good idea to shop for lower rates, but this would be a good time to review your deductibles. Remember, for many policyholders, there are now two deductibles: one for home and contents, including fire, theft, and other claims, and one for wind and hail.

Double-check to see if you are one of the folks with a percentage-based deductible and/or ACV policy. Most of the carrier our agency sell offers a flat dollar amount and the option of a percentage-based deductible.

For more information on homeowner's insurance coverage options and quotes, contact Insurance Brokers Group at 314-569-1010, or for additional info on the cost of home insurance, read our article about the home insurance calculator.

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John Espenschied is a long-time veteran of the insurance industry. He's worked with thousands of clients over the years, helping to protect their personal and business needs. John's goal is to provide the best advice possible to assist customers in saving money while protecting their property and securing their financial future.
He truly enjoys helping others and takes great satisfaction in providing top-notch customer service. When he's not working, John has fun spending time with his family, golfing, bike riding, and blogging on insurance topics.