The cost of Home Insurance is based on the losses in your area. Extreme weather works in cycles, so a specific area will have several years of very severe storm losses, causing rates to go up. When that cycle ends the losses go down and so do the rates. Of course construction costs tend to trend up, as do the values of everything else, and insurance rates have to adjust to compensate, but without rate increases, insurance companies would not be able to afford to stay in business through the bad years. A great example of this is the state of Florida. After Hurricane Andrew, insurance companies were hit very hard. When they tried to raise rates the state passed legislation limiting rate increases. So, backed into a corner, many insurance companies went broke or pulled out of Florida. Consequently, the largest insurer in Florida is now the state of Florida (the taxpayers are on the hook for claims if another significant storm hits). After several years of no severe storms, that trend is reversing with several insurance companies coming back into the state and the # of policies the state holds is decreasing.
I’m sure your insurance company would say “yes” to that question and I would say most homeowners will find their premium does increase each year. Usually there are two reasons. Insurers increase their rates and insurers tend to increase the amount of insurance on your home by inflationary factors tied to increased construction costs in your area.
But that doesn’t mean your premium has to increase every year, it means it may be time to take a closer look at your policy and premium.
If you want your policy to pay to rebuild your home if it is destroyed and the cost to rebuild your home has increased, increasing the amount of insurance may be appropriate. But increasing the amount of insurance does not necessarily mean your premium must increase. You may be entitled to additional credits for not filing any claims, structural updates or improvements or added security. Maybe your credit score has improved and you are eligible for more favorable rating treatment. You may even want to check with other insurers to see if they offer more favorable terms.
But bottom line, there is no reason your homeowners’ insurance premium should go up each year. You just have to take a look at it, find out why and see what your alternatives are.
Founder, City Building Owners Insurance, Somers, NY
As Frank indicated, homeowner insurance premiums should not necessarily increase each year. To make sure your coverage stays current, you should look at the replacement cost necessary to rebuild the home on a regular basis. This number may well increase for a number of reasons, which can increase your insurance premium. At the same time, you can often offset potential premium increases by making your property profile more attractive to insurance companies, such as security and other system upgrades.
If your premiums are increasing, then your agent or broker should explain why. Otherwise, this could be a sign that you need to consider other insurance partners who will take a more active role in making sure you have the best policy and premium for your situation.
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I’m sure your insurance company would say “yes” to that question and I would say most homeowners will find their premium does increase each year. Usually there are two reasons. Insurers increase their rates and insurers tend to increase the amount of insurance on your home by inflationary factors tied to increased construction costs in your area.
But that doesn’t mean your premium has to increase every year, it means it may be time to take a closer look at your policy and premium.
If you want your policy to pay to rebuild your home if it is destroyed and the cost to rebuild your home has increased, increasing the amount of insurance may be appropriate. But increasing the amount of insurance does not necessarily mean your premium must increase. You may be entitled to additional credits for not filing any claims, structural updates or improvements or added security. Maybe your credit score has improved and you are eligible for more favorable rating treatment. You may even want to check with other insurers to see if they offer more favorable terms.
But bottom line, there is no reason your homeowners’ insurance premium should go up each year. You just have to take a look at it, find out why and see what your alternatives are.
If your premiums are increasing, then your agent or broker should explain why. Otherwise, this could be a sign that you need to consider other insurance partners who will take a more active role in making sure you have the best policy and premium for your situation.