Your home insurance premiums are based on a lot of different factors, and these factors can either cause a decrease or increase in premiums once your premium renews. Even if your personal situation remains the same, there might still be a few details that can cause your home insurance rates to rise. Some of these factors will be in your control, while others won’t be.
If you have noticed your home insurance rates rising each year, and want to know why, here are some details on what might be behind the increase (and how you can keep them as low as possible).
Undervalued Home Insurance
This is one of the most common causes of rising home insurance rates: it is simply an increase in home value or coverage needs. Sometimes homeowners just don’t have enough coverage for their home. Specific policies only cover a certain mortgage’s balance on a home, and there are many policies that only cover up to a home’s fair market value. None of these are sufficient, since one only protects the bank’s interest, and the other does not cover how much it will cost to rebuild a home. In most cases, increasing labor and material costs will make rebuilding a home more expensive than what it will sell for on the market.
This means premiums go up, but not because of any underlying factor that changed. Simply because more coverage is needed.
In another example, you could have made some renovations or updates which increased the value of your home. Say, if you just finished your basement, or installed another bathroom. If the value of your home increases then you will most likely need to pay more for insurance.
Your Claims History
If you’ve recently made a claim, and then found out your premium increased there’s a few reasons for that. Many insurance companies reward their customers with lower premiums if they have remained claims free for a specific period of time. On the other hand, if you’ve made several claims within a block of time you might have a surcharge added onto your premiums to offset the costs of them having to process multiple claims.
Changing Climate Conditions
One of the most widespread causes of rising home insurance rates is due to climate change. With climate change comes worsening weather events, which can include disasters which can be tragic. These events are occurring in many parts of the country. Hurricanes, earthquakes, tsunamis and other big natural disasters lead to big claims. This means insurers need to raise premiums in order to cover the increased payouts they need to make.
Sometimes, trends in your area change over time. In some cases, the trends in your area will show that you are now at a higher risk for burglary or other incidents. Insurance companies use analytics to predict the likelihood of you making an insurance claim. As the likelihood of you making a claim increases, so will your insurance premiums. The cost of your home insurance will rise if your insurance company predicts that homes in your area are more prone to burglaries, then your premiums will rise.
Things You Can Do To Lower Your Home Insurance Premiums
As the insurance market changes, it’s important to shop for the best home insurance policy in a responsible way. You need to be able to determine what your needs are and then compare policies that offer those coverages.
There are many factors that can cause your home insurance prices to go up, and you can’t control every one of them. But there are still some things you can do to lower your premium. Here are some examples:
Shop around for your home insurance, or contact an insurance agent, to find out what policy is best for you. Get and compare multiple quotes before you decide on one. It’s also a good idea to compare features like the deductibles, coverage amounts, reimbursement types and endorsements.
You can also increase your deductible, which is the amount you agree to pay, or the amount your insurer requires you to pay towards the total amount of your insurance claim. Your insurance company will only be responsible for the remaining amount after you pay your deductible.
Another way to reduce your premiums is to bundle your home and automobile insurance coverage with the same company. Some insurance companies will offer premium discounts if you purchase more than one policy from them.
Improving your home security is also a good way to reduce your insurance premium. You can install smoke detectors, carbon monoxide detectors, burglar alarm systems or deadbolt locks. Be sure to ask your insurance agent or broker for more information.
Lastly, it’s important for you to review your insurance policy annually. It should reflect your home’s current value and condition. Review your coverage to stay on top of things, and make the necessary adjustments. If you find that during your annual review your insurance premiums are too high, you can always find a better quote with another insurance company.
Kristy Ngai is a content writer for BreezeMaxWeb that helps businesses showcase their brand through enticing copy. When she’s not working, you can find her playing net in a local beer league or biking around the city.