Market Trends: Rising Home Insurance Rates

Home insurance prices fluctuate based on your home’s location, value, age and construction materials.

The national average for home insurance is around $2,614 per year for $250,000 in dwelling coverage, according to MoneyGeek. Rates have increased steadily in areas with extreme weather like floods, wildfires, tornadoes or hurricanes. And with inflation driving up the cost of materials and labor, prices have skyrocketed.

Don’t cancel your insurance coverage

Even if you own your home outright, you may have a legal obligation to maintain insurance. According to the Insurance Information Institute, 12% of homeowners have dropped their insurance to save money. But going without insurance isn’t recommended. Here’s why:

You won’t have enough money to rebuild after a disaster.

You might be tempted to skip home insurance altogether. If you go this route, you’ll need enough cash to rebuild your house. Essentially, you’re self-insuring. Remember, you already paid for the house once; you’ll pay for it again without reimbursement. And it’s always more expensive the second time around. All the things driving up your home costs are why insurance companies are charging more.

Lenders and cosigners require it. 

Home insurance isn’t legally required, so you can own your home without insuring it. But most people have a mortgage lender or another financial stakeholder in their home, and those institutions require homeowners to carry insurance.

Homeowners and condominium associations require it.

Most community associations require you to buy a minimum amount of insurance. Community associations include condominium associations and homeowners associations, which oversee condominiums, housing cooperatives, townhomes and single-family homes. Around 27% of all homeowners belong to an association.

Insurance protects everyone. From leaking water that could damage a neighboring unit to a fire that could gut an entire residence, you’ll want protection. Home insurance guarantees that owners have the funds to repair or rebuild. Without it, you risk value depreciation because no one wants to buy into a condo complex with burned-out units. 

Many associations have a first right to refusal, including purchasing properties listed below the market value. Associations might use their reserves or levy special assessments to buy homes that drive down everyone else’s home values because the listing price is low. That’s why more HOAs and COAs require owners to have enough insurance to restore their homes rather than sell at rock-bottom prices to avoid repairs.

It’ll be harder to get coverage later. 

Going without coverage can make you appear riskier to some companies. And don’t let your policy lapse in a hard market, either. Some companies will take it as an opportunity to drop you for good, leaving you scrambling for coverage. Sign up for auto pay to ensure your payments are made on time.

What to do about rising insurance rates

You can do a few things to minimize costs or get more out of your current spending:

Ask your agent for a coverage review. If you haven’t looked at your coverage in a while, now’s the time. Insurance is a risk management tool. You can use it strategically to help cover what matters to you. Ask questions and see if there are ways to reduce your premiums. You might be paying for things you don’t need anymore, especially if you’ve gone through life changes like a divorce or retirement.

Know your credit score. Some insurance companies use credit scores to calculate your insurance premiums. If your score has increased significantly, you might ask your agent to shop around. You might qualify for lower rates, better coverage or both.

Bundle your coverage. Some companies offer multiple policy discounts to get your business. Ask your agent to run the numbers and see if you could save by combining your home and auto policies.

Try a personal umbrella policy. If you need to increase your home or auto policy limits, an umbrella can help. It’s a way to get significantly more coverage for less than what it would cost to raise your policy limits separately. Call your agent for details.

Pay upfront. Some insurance companies give discounts for paying the policy in full instead of monthly. If you can afford it, it might be worth a look.

Residential building collapses are costly. You may recall the 2021 condo building collapse in Surfside, Florida, that killed 98 people. The owners of the condo units were awarded a $1.2 billion settlement. Your condo unit may be in fine shape, but your building is also under scrutiny. If your building is older or in disrepair, you could see a price increase in your assessment fees to cover the building’s policy.

Know your insurance premiums before you buy. You might have a coastal dream home in mind, but the insurance rates might cause more sticker shock than the home price. Call your agent if you’re in the home-buying market to see if the area you love is also an insurance nightmare. It’s one more piece of information to have before you buy.

Keep your property in good condition and report changes. Insurance companies can use drones and satellites to monitor homes. They can legally look for problems with roofs and chimneys. Others might ding you for having an unreported trampoline in your backyard since it’s an attractive nuisance and can affect your liability. Some insurance companies might look for reasons to drop customers in a tight market.

Know what comes in your renewal. Your Advisor can help find and discuss options on your current policy during the review process that can not only enhance your coverage to make sure there are no gaps, but also add updates and discounts that may help offset premium increases. These changes are often better than what you can receive moving to a new carrier and many times the longer you are with your carrier the more options become available to continue your relationship with that carrier after a loss or two.

Call your agent and ask for a review

Insurance premiums will rise based on inflation and catastrophic events. You can use some of these tips to manage your premiums and avoid surprise cancellations. If you’re up for renewal soon, reach out to our Personal Insurance team 60 days ahead of the renewal. This will give them time to scan the market. They can shop different insurance companies for the best prices for your needs.

This content is for informational purposes only and not for the purpose of providing professional, financial, medical or legal advice. You should contact your licensed professional to obtain advice with respect to any particular issue or problem. Please refer to your policy contract for any specific information or questions on applicability of coverage.

Please note coverage can not be bound or a claim reported without written acknowledgment from a OneGroup Representative.

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