Why Did My Homeowners Insurance Go Up?
In a time when expenses in all parts of our lives are going up, you may wonder, "Why is my homeowners insurance so high?" There are many variables that factor into your insurance premiums. Some of these are in your control, but others are things that you cannot influence. For example, things like the frequency and severity of natural disasters, changes in construction costs due to supply chain challenges and inflation, and changes to regulatory guidelines and building codes are things you can't really change.
As these costs increase on a societal level, they factor into insurance premiums and cause them to rise. On the contrary, your own claim history, the condition of your property, the coverages and deductibles you select, and the discounts you qualify for are factors you can influence. Understanding these factors can help homeowners make informed decisions about their coverage and explore ways to help mitigate the cost of homeowners insurance.
Understanding home insurance rate increases
You may be wondering – how much should homeowners insurance increase each year? The answer can vary person to person based on the factors at play in your unique situation. Your insurer should be able to help you understand what is influencing your home insurance rate. It's a good first step to gain an understanding of common contributors to home insurance rate increases. Here are some other key contributors to home insurance rate increases:
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Natural disasters and climate change:
Natural disasters, like floods, wildfires, hurricanes, hail and other severe weather events, have significantly impacted the U.S. property and casualty insurance industry, contributing to $21.2 billion in losses in 2023.1 These catastrophic events have caused widespread damage, leading to an increase in claims filed with insurance companies.
To cover the unprecedented losses and to maintain financial stability, most insurance carriers have had to raise their rates. The increase in premiums helps insurers manage the higher risk associated with frequent and severe natural disasters, giving an answer to the question, “Why did my homeowners insurance go up?”
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Home improvements and increased property replacement value:
An important factor in the calculation of your insurance premium is the cost to replace your property if it were to be seriously damaged. Anytime you upgrade materials or renovate your home, your coverage needs increase, and the cost of your insurance could go up. If your home were to have a fire and need to be rebuilt, it would cost more because of the upgrades and additions made to the property. It's very important that your homeowners insurance has sufficient limits to fully protect your property, but the potential home insurance increase is something to take into account as you make upgrades to your home.
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Changes in local building codes:
Construction methods and practices evolve over time and local building codes and state regulations can change along with them. When building codes are updated, they often require homeowners and builders to adhere to new standards that can increase construction costs. These updated codes may require the use of more expensive materials, additional safety features or more rigorous construction techniques. For example, new regulations might require stronger foundations, enhanced fireproofing or better insulation. The expense to adhere to new building codes can increase the cost of insurance claims significantly, which in turn causes increases in the cost of homeowners insurance coverage.
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Increased cost of materials and labor for repairs:
The construction industry is subject to its own challenges and the impacts of supply and demand. Whether it be supply chain disruption or a shortage of needed materials after a catastrophic event, construction costs can rise sharply at times. The increased cost of obtaining necessary building materials can drive up claim costs and result in increased homeowner insurance costs in the impacted area over time. Higher construction costs lead to increased replacement costs for homes, which can result in higher homeowners insurance premiums.
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Economic inflation:
As material prices rise with inflation, so do the cost of repairs. Contractor wages and fuel costs to transport materials are examples of common expenses that can drive claim costs higher. This can lead to an increase in the cost of building and renovating homes, which can drive up home repair prices and homeowners insurance premiums.
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Claims history:
Your recent claims history plays an important role in determining your insurance rates. If you've filed multiple claims in the past, it's an indicator to insurance carriers that you may be more likely to file claims in the future. Consequently, your rates may be adjusted to reflect this potential higher risk.
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Increased risk factors:
Certain additions to your property, such as installing a pool or trampoline, may be considered "attractive nuisances" by insurance companies. These features can increase the risk of accidents or injuries, prompting carriers to raise your rates to account for the added risk.
Tips for reducing homeowners insurance premiums
There are ways to save money on homeowners insurance without compromising on coverage. Here are some practical tips to help you manage and lower your homeowners insurance premiums:
- Bundling insurance policies: The easiest way to reduce costs may be to bundle auto and home insurance. At Amica, policyholders can save up to 30% off policy premiums when they bundle two or more policies.2
- Reviewing home discounts: Amica offers a variety of homeowners insurance discounts and incentives to save you money on your policy premium. If you’ve purchased a new home, or upgraded key systems like plumbing, electrical or roofing, you could qualify for a discount. Additionally, installing systems that prevent or mitigate losses can earn you a discount. This includes home security systems, water/gas leak detection systems and other smart devices.
- Increasing deductibles: A higher deductible may lower your policy premium, depending on how high you choose to go. While this is a very effective way to reduce insurance costs, be sure to choose a deductible you’re comfortable paying if you need to file a claim.
- Regular checkups on your electrical, plumbing or heating systems can identify problems early, helping you avoid the stress of costly, unexpected repairs. This type of routine preventive home maintenance may help you lower your home insurance premiums.
You can help keep insurance premiums low by taking steps to mitigate losses, making claims in good faith and taking the highest deductible you're comfortable with.
Next steps for managing your homeowners insurance policy
Now that you know some of the factors that can influence homeowners insurance rates, make sure to review your policy information regularly. Your premium may fluctuate with each renewal, whether or not you've experienced a claim. It's important to ensure you are fully protected with adequate coverage and that you're taking advantage of all of the policy discounts you're qualified for.
We’re always available to discuss discounts and coverage options with you to help find homeowners insurance tailored for you and your budget.
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1 Best’s Special Report: Underwriting Losses Persist in U.S. Property/Casualty Industry, Total $21.2 Billion in 2023.
2 Discounts may vary and are not available in all states.
Your Policy, Policy Declarations or Amended Declarations in effect on the date of loss is the primary source of reference for your coverage, coverage limits and deductible amounts.
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