Why Homeowners Insurance Premiums Are Rising and What You Can Do
Updated: May 3
Most people can expect their homeowners' insurance rates to go up this year — along with the cost of materials and supplies — in this economy.
Several factors are behind the rising rates. The increasing frequency of severe weather events is causing more serious damage and more costly insurance claims. The rising cost of building materials, supply chain issues, and unfilled jobs due to COVID-19 disruptions are driving up the costs of home repairs.
In this article, we’ll explain some key factors causing home insurance rates to rise and what you can do to help rein in your costs.
What Are Some Key Factors Driving Up Home Insurance Rates?
Extreme Weather Events and Catastrophes Hurricanes, floods, droughts, wildfires, and other severe weather events have become more frequent, destructive, and costly. In 2021 alone, the United States sustained 20 weather events with losses exceeding $1 billion each.1 As weather-related damages go up, so does the cost of insurance overall. Insurers typically adjust rates on a state-by-state basis based on actual and anticipated weather-related losses. Rising Material Costs Another key consideration when pricing homeowners coverage is the cost to repair or rebuild a home in the event of a loss. These costs have risen significantly during the pandemic because of:
A general increase in demand for home renovations.
A general increase in demand for new construction.
Supply chain disruptions in the United States and around the world.
These factors combined have led to limited supplies and inflated prices for most building materials. Consider this sampling of price increases as of October 2021:
Material goods for new residential construction are up 18.6% over the past year.2
Lumber and wood products are up 6.2%.3
Asphalt roofing materials are up 16.3% over last year.4
As building costs go up, so does the cost to repair or replace homes damaged by covered losses.
Job Openings in Skilled Labor New home and renovation projects may be surging, but the construction industry is facing a skilled labor challenge. The sector had 358,000 job openings as of August 2021,5 more than twice the projected number of annual openings.6
Factors Impacting Your Homeowners Rate You May Be Able to Control
Current market conditions that affect your insurance premiums may be out of your control, but there are steps you can take to help keep the cost of your homeowners coverage in check.
Take steps to prevent losses. Be sure to check with your MFIA agent about any savings you might qualify for as a result of the preventative measures you take. For example, Travelers offers insurance premium discounts for smoke detectors, fire alarms, water sensors, interior sprinkler systems, and smart home protection devices.
Review your insurance. Ask your MFIA insurance agent to review your current coverage to ensure you’re getting the customized protection you need. Make sure all home improvements are accounted for. Cancel or reduce the coverage you no longer need.
Increase your deductible. A higher deductible will likely reduce your premium. Just remember to have enough savings to cover your deductible should you experience a loss.
Bundle your coverage. Travelers offer discounts when you purchase more than one policy with them. Home and auto are commonly bundled for a discount, but discounts may also apply to boats, valuables and personal umbrella protection, and other specialty coverages. Learn about the multi-policy insurance discounts that Travelers offers.
Look for customer retention programs. Travelers offer premium discounts, or credits to long-term customers. For example, the Travelers Decreasing Deductible®* program applies for a $100 credit each year toward your deductible. This credit is earned at your annual renewal date even if you have a loss.
*Travelers Decreasing Deductible is not available in California. Current market conditions are challenging. Catastrophic weather events are on the rise. Pandemic-era disruptions, including shortages in building materials and skilled labor, are driving rate changes. But there are factors within your control when it comes to the premiums you pay. It’s smart to take advantage of them.
Sources from Traveler's blog: 1. https://www.ncdc.noaa.gov/billions/ 2. U.S. Bureau of Labor Statistics, Producer Price Index by Commodity: Inputs to Industries: Net Inputs to Residential Construction, Goods, October 2021 3. U.S. Bureau of Labor Statistics, Producer Price Index by Commodity: Lumber and Wood Products, October 2021 4. U.S. Bureau of Labor Statistics, Producer Price Index by Commodity: Asphalt Felts and Coatings, October 2021 5. U.S. Bureau of Labor Statistics, Job Openings: Construction, September 2021 6. U.S. Bureau of Labor Statistics, Construction Laborers and Helpers, September 2021
This Blog post is made available by the MFIA for educational purposes only as well as to give you general information and a general understanding of the current insurance market, not to provide specific insurance advice.
For a bit of specific insurance advice, contact us to get a free quote.