Many factors go into choosing your home. Your insurance company also has many factors to consider when determining your home insurance premium. Still, it can come as a surprise when your premium goes up. Here are several reasons why you usually see home insurance premium increases each year.
Inflation. Some years are affected more by inflation than others. This year, some of the higher labor and material costs that companies have experienced due to the pandemic are being passed on to consumers, raising the cost of building a home as well as the cost of items within your home such as appliances, furniture, etc.
Construction costs. If your home needs to be rebuilt or replaced due to a catastrophe and your area has been hit with severe weather, there may be labor shortages; rates typically escalate in those circumstances. The spike in the cost of construction materials this year is also a factor.
Claims. Insurance is meant to offset the cost of major expenses if something serious happens to your home. But filing a claim may also raise your premium. Think twice about making smaller claims—if it’s not going to cost much more than your deductible, it may be worth paying out of pocket.
Changes to your property. Updating your kitchen, putting on an addition, or other large investments are going to increase the value of your home, which may increase your insurance rate.
Attractive nuisances. A swimming pool or trampoline in your yard poses a higher risk compared to homes that don’t have these items. Make sure you clearly understand your insurance company’s policies regarding attractive nuisances. You could see a rate increase or potentially lose your insurance all together.
Your insurance score. Your insurance score is calculated based on your likelihood of filing a claim during a given coverage period and on your credit score, among other things. A lower insurance score can affect your insurance premium.
Fortunately, there are ways to lower your premium, such as bundling your insurance, increasing your deductible, keeping up your credit score, avoiding small claims, and actively pursuing any discounts you may be entitled to. But be sure to alert your insurer to any changes to your home so you remain properly insured—it’s important for maintaining your financial health.
Call us if you have questions or to get a free insurance quote at 1-800-279-4030.