Homeowner’s Insurance Rates Spiking Over $3,000 a Year on Average
According to a recent report by The Zebra, the average homeowner is paying roughly $3,000 a year for homeowners insurance. Unfortunately, this is just the nationwide average, in many states premiums are dramatically higher for most homeowners.
According to the Zebra report, the most expensive states for homeowners insurance are:
- Nebraska: $7,920
- Oklahoma: $7,426
- Kansas: $5,303
On the flip side of that coin, the three least expensive states for homeowners’ insurance are:
- Hawaii: $721
- Vermont: $1,159
- Delaware: $1,225
The cost of homeowners insurance keeps climbing and there are numerous reasons for the rise in premiums. While inflation is certainly responsible for some of the increase, it’s not the only reason.
Repair and rebuilding costs have jumped up over 55% between 2020 and 2022 according to the Insurance Information Institute (Triple-I) as the price for building materials and labor increased. Higher rebuilding costs are typically passed onto policyholders via higher premiums.
In addition to inflation and rising prices, severe weather, driven by climate change has led to more frequent and damaging storms. This pushes up the cost of insurance as insurance companies need to pay out more often on claims and in many cases the average cost of each claim is higher due to the severe damage these storms cause.
Insurance companies must also purchase reinsurance which is basically just insurance for an insurance company and in recent years the cost of reinsurance has skyrocketed. Unfortunately, for policyholders, most insurers pass those additional reinsurance costs onto their policyholders by raising their rates.
Finally, one last factor that is raising rates is better risk modeling. As risk modeling has improved, insurers have raised rates in areas they rate as risky and, in some cases, have stopped writing policies in these areas altogether. Florida and California are great examples of states where insurers have pulled out of some areas due to hurricane and wildfire risks. In these areas, homeowners have to find coverage with the state insurer of last resort where policies tend to be expensive and limit coverage levels, leaving homeowners exposed.
Here are a few tips to help keep your homeowners insurance affordable:
Shop your coverage: Insurance companies rate risk differently and that can lead to dramatic differences in premium quotes. Shop your policy at least once a year by gathering quotes from as many insurers as you can. Always make sure you are comparing apples to apples when it comes to coverage levels and deductibles.
Raise your deductible: The higher your deductible, the lower your premium. If you can afford to double your deductible, you should see a significant discount on your premium. Always choose a deductible that you can easily afford in the event you have to make a claim on the policy.
Improve you home: Putting a hail resistant roof on your house or adding a monitored burglar alarm can all lead to discounts on your premium. Ask your insurer for a list of improvements that can lower your insurance costs and upgrade your home. Once improvements have been made ask your insurer to rerate you policy.
Discounts: Insurers offer tons of discounts so make sure you are getting all discounts you are qualified to receive. Bundling your auto insurance, good student, claim free history and even going paperless can all lower your insurance costs.