Why Did My Homeowners Insurance Rate Increase this Year?

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Why Did My Homeowners Insurance Rate Increase this Year?

2021 and 2022 have been rough years when it comes to insurance. Many homeowners have experienced an increase up to 12.4% from May 2021 to May 2022, meaning on average that’s a $134 increase. And that’s the average!

So what happened? Why the significant increase all of a sudden?

Let’s take a look at five common reasons you too, may have seen a jump in rates on your homeowners insurance.

1. Record-high Inflation

Homeowner insurance rates are heavily based on how much dwelling coverage is included in your policy, meaning how much it will cost to rebuild your home. Although you may have bought your home for $400,000, the actual cost to rebuild your home after a disaster may only be $250,000. The $250,000 then is the cost insured to rebuild your home, so when construction materials and labor are low, the amount your insurance company will have to pay on the home rebuild will only slightly increase as the years go by.

Now take our current economic conditions. Inflation and interest rates are causing everything to go up. Labor and construction material prices are all surging and it means the rebuild costs are going up as well. Insurance companies are having to keep up with these rising prices, and unfortunately, your rates are climbing with them.

2. More Extreme Natural Disasters

Watch the news on any given day and it is apparent, extreme weather disasters are on the rise. The Western US continues to experience unprecedented destruction from wildfires, the Southern US is under water from disastrous flooding, and the Midwest is under continual threat of tornadoes and floods!

Extreme weather is happening all over the US, and in order to protect themselves from future bankruptcy from all the costly claims being filed following these natural disasters, insurance companies are raising insurance rates to balance things out. Add in inflation on price and higher reconstruction costs, and that is a guarantee rates are going to go up.

3. Your House is Older and Needs Upgrades

Homes in need of repairs or upgrades indicate the possibility of a claim being filed, as costly repairs on roofs or burst pipes carry some of the highest (and most expensive) insurance claims costs. So, if you have an old home and you haven’t done any upgrades to the roof or plumbing, it may give reason you now have a higher rate on your insurance.

4. Insurance Score Decreased

Did you have a lot of claims filed last year? Did your credit score decrease? Insurance companies establish insurance scores on homeowners that statistically measures the likelihood you may file a claim. If your credit score decreased or you filed one or multiple claims, you can bet it contributed to your rate increase.

5. Attractive Nuisances

If you installed a swimming pool, added a trampoline in your backyard, or even added a family pet, all of these things attract children to your home and increase the potential of injury on your property. In order to offset expensive liability claims, homeowners will likely see an increase in their rates.

Contact Covered to See if We Can Reduce your Premium

If you are among the many American homeowners experiencing homeowner insurance rate increases, be sure to contact the Covered team and talk with us about the changes happening with your rates, and allow for us to help determine if there are other means to lower your rates such as increasing your deductible or checking to see if you qualify for any discounts. Call us anytime at 833-487-2683 or email service@itscovered.com.