Why Are My Home Insurance Rates Going Up? | Hitchings Insurance

Why Are My Home Insurance Rates Going Up?

Home insurance is an insurance product purchased to protect what is easily your biggest investment: your home. Your home is the roof over your head – a place of memories for you and your loved ones. It’s the place that you return to at the end of the day and where you may be or have raised your children. The main reason people purchase home insurance is to protect themselves from financial liability, which can arise both in the case of major and minor damages to your property. Policies are designed to cover homes from unexpected events, like fire, flooding, and storms.

But insurance isn’t free. You’ll pay for it in something called “premiums” – which are charged to you each month and calculated based on your risk factor. The likelier you are to make a claim in the future, the more you’ll pay for your insurance per month. On your last renewal, you may have noticed your rates have increased. Why is this? It can seem unfair – especially if it appears to have occurred “for no reason.” There are a few reasons why your home insurance rates may have increased. Let’s dig in.

No. 1: You’ve made renovations to your home recently.

Any change to your home which causes its value to change will raise your rates. This includes renovations, additions, or home system replacements. That’s not to say that all renovations are bad. Updating a home’s older systems – especially homes with old electrical, heating, or plumbing systems – can reward you with a rate reduction. But a $15,000 kitchen makeover? Probably not.

Discuss with your insurance agent if you are planning to make any renovations to your home. Some modifications can reduce your rates, whereas others may necessitate a change in coverage to ensure that your policy reflects the total replacement value of your home!

No. 2: Supply chain disruptions and changes are increasing building material costs.

Even though we’re transitioning further and further away from the economic impacts that the pandemic left on us, supply chain disruptions, inflation, and labor shortages are still continuing to be an issue. Demand rises but there are fewer contractors available to do the work, resulting in heightened building material costs. This means, overall, it’s more expensive to repair or replace parts of your home if something happens. Due to the increased cost of payouts, insurers are having to compensate by raising rates.

No. 3: You have made a lot of claims in recent history.

The more claims you file, the likelier you will be perceived to make a claim in the future. Think of it more like statistics than penalization for filing a claim. Oftentimes, home insurance companies may waive your first claim rather than raise your rates immediately, but it depends on the severity and cost. Reduce your odds of having your rates increase as a result of having claims by fixing small issues yourself, and do your part in preparing your home against natural disasters, theft, and vandalism. You may even qualify for a discount by purchasing an approved monitoring system.  

No. 4: Changes to the local trends.

Have crime rates gone up? Has there been a new subdivision developed in your area? A new commercial development? These can impact your rates. Your postal code is one of the many factors considered when calculating your rates, so if there has been a change between your last renewal and now, you may see this reflected in your new premiums.

No. 5: Climate change is increasing the rates of natural disasters.

Climate change. Many climate specialists allege that our Earth is nearing the point of no-return. As the climate crisis worsens, it contributes to an overall increase in temperature globally. Although gradual, this increase in temperature has caused a devastating increase in extreme heatwaves, natural disasters, flooding and heavy rainfall, wildfires, and more. Storms and nasty weather events can cause tremendous physical damage to our homes, costing insurance companies millions – even billions – of dollars cumulatively around the globe. To compensate for the high cost of repair and replacement payouts, insurance companies are forced to raise their rates for all the homes that are insured under them, not just those that have made claims. So even if your home wasn’t damaged by a nasty weather event, you’ll still see the backlash of raised rates.

Conclusion

Unfortunately, there are many things that contribute to a raise in home insurance rates. Policyholders may find their rates increase for what seems like no reason, when in reality there are a lot of external factors contributing to the spike. It can seem hopeless – and frustrating! Here’s a few tips from Hitchings Insurance Agency to combat your rate increases:

  • Bundle your auto and home insurance policies through the same provider.
  • Increase your deductible. The higher the deductible, the lower your insurance premium.
  • Ask about membership or employment discounts. Some companies offer discounts if you are part of a specific professional group or if you are an alumni of a particular university.
  • Do a credit score check. If you have good credit, you could qualify for a reduction.
  • Ask about discounts for claims-free, fire systems, and alarm security systems.
  • Do small repairs on your own. If you don’t need to file a claim, take care of the issue by doing the repairs yourself or hiring a contractor. This will save you an increase in your premiums.

For more advice based on your personal circumstances, or for further questions regarding a raise in your rates, give the team at Hitchings Insurance Agency a call to discuss today.