Common home insurance charges are rising quicker than inflation – and they’re unlikely to be slowing down – Fox Enterprise
Average home insurance costs rose 11.4% between 2017 and 2020, outpacing inflation and driving up home prices for Americans across the country. (iStock)
The average cost of home insurance is rising faster than inflation, and consumers should expect this trend to continue into the new year.
Annual home insurance premiums increased 11.4% between 2017 and 2020, according to S&P Global Market Intelligence. Over the same period, according to the Consumer Price Index (CPI), inflation rose by 5.6%.
These additional costs come at a time when home ownership is already out of reach for many Americans, as home prices are rising and mortgage rates are expected to rise in 2022.
Read on to learn more about why home insurance premiums are rising and how you can keep your rates down. You can search for free home contents insurance offers on Credible.
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Why is the average home insurance cost increasing?
Average homeowner insurance costs rose to an all-time high of $ 1,398 a year last year, according to the Insurance Information Institute (Triple-I).
The rise in home insurance premiums can be attributed to a number of factors including "the frequency and severity of natural disasters in recent years combined with increasing costs for items used in rebuilding damaged homes," said Michael Barry, chief communications officer at Triple- I. .
Insurers recognize that natural disasters are increasing in frequency and severity and try to price their policies to address this risk.
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Barry added that "rates are based on actual and expected losses in each state," which have been difficult to predict over the past several years. The 2020-21 hurricane season resulted in record losses in coastal states like Louisiana and Florida. Other unexpected disasters included the February 2021 freeze in Texas and the recent Colorado wildfires.
Plus, the cost of disaster recovery is higher than ever. Labor prices have skyrocketed during the coronavirus pandemic, while the cost of materials like wood continues to rise due to supply chain disruptions. This drives up the replacement costs, so that insurance companies pay out larger claims.
Higher loss sums affect the insurer's combined ratio, ie the amount they pay out in claims for every dollar earned in premiums. Despite rising average annual premiums, home insurance companies have struggled in recent years to keep their combined ratio at sustainable levels, Barry said. This means that insurers may have to keep increasing their tariffs just to keep up with operating costs.
Learn more about how home insurance premiums are calculated on Credible.
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This is how you can keep the costs of your home insurance down
With average premiums expected to continue to rise, it is up to consumers to find ways to save on their home insurance costs. Here are some ways to find a lower Triple-I insurance premium:
- Opt for a policy with a higher deductible. Your deductible is the amount you have to pay before your insurance company starts paying a claim. Adding $ 1,000 to your deductible can save you potentially up to 25% on your premium. Higher deductibles result in lower monthly payments, but you will have to pay more out of pocket in the event of an accident.
- Bundle your insurance contracts. Companies that offer home insurance, liability insurance, and auto insurance can offer discounts of between 5% and 15% when you purchase multiple policies through them.
- Look for discounts on home insurance. Homeowners may be eligible for insurance discounts based on their age, employment status, and even creditworthiness. For example, retired homeowners aged 55 and over can get discounts of up to 10% with some businesses.
- Upgrade your home. You may be able to lower your home insurance premiums by making your home more disaster-proof with storm shutters and stronger roofing materials. Upgrading your heating, plumbing, and electrical systems can reduce the risk of water and fire damage. Finally, if you live in a high crime area, installing a sophisticated sprinkler system or intrusion alarm system can cut your premium by up to 20%.
- Shop all about home insurance. Insurers set tariffs based on a number of factors, and the premium you can qualify for can vary from one insurance company to another. "The beginning of the year is a good time to look around and see if you can get the best deal," said Barry.
Shopping can potentially save you hundreds of dollars a year on your premiums. On Credible, you can compare offers for home insurance from several insurers free of charge.
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