As with most things, prices for homeowners insurance are increasing. So if you find yourself asking “why is my homeowners insurance so high?” rest assured, you aren’t alone.
Homeowners insurance provides financial protection to the homeowner in the event of property damage or damage to their personal belongings, as well as liability for injuries or damages that occur on their property. But home insurance rates don’t remain static and can change over time, due to market conditions, natural disasters, and inflation (among other factors). And according to the Insurance Information Institute, homeowners insurance rates have been on the rise, and are only expected to continue rising.1
Keep reading to learn more about what can contribute to homeowners insurance rates and practical ways to reduce your insurance cost.
At a glance:
- Choosing the wrong insurance company, low deductibles, and poor credit scores can contribute to high insurance rates.
- Comparing rates, raising deductibles, bundling policies, and researching discounts are effective strategies for reducing insurance premiums.
- Regularly reviewing your homeowners insurance policy can help minimize expenses down the road.
How has homeowners insurance changed in recent years?
Home insurance has adapted to evolving risks, market conditions, and consumer needs over the past several years, reflecting both the risk landscape and consumer demands. Notable changes include:2
- An increased focus on natural disasters
- Personal property coverage adjustments
- Evolving liability coverage due to rising medical costs and legal expenses
- Growing availability of optional coverages, like flood insurance
Homeowners insurance predictions for 2023
Although inflation has begun to slow in the second half of 2023, it is predicted that the inflation rate will continue to rise, affecting the cost of construction materials, labor, and replacement costs for damaged properties, which often lead to higher home insurance premiums.3
Along with inflation, certain states may experience more significant insurance changes due to added local factors such as weather patterns, increased property risks, or regulatory changes. While it's challenging to gather predictions for rate changes in every state, here is a list of states/regions that may experience rate changes:4
- Coastal states (Florida, Louisiana, and South Carolina, etc.)
- Wildfire-prone regions (California, Oregon, and Washington, etc.)
- Tornado Alley (Oklahoma, Kansas, Nebraska, and Texas, etc.)
- High-population-density states (New York, Illinois, and New Jersey, etc.)
- States with high crime (Michigan, Louisiana, and New Mexico, etc.)
Factors that affect homeowner’s insurance rates
There are a number of factors that can impact the cost of insurance coverage, and wrapping your head around these factors is key to managing your insurance costs effectively.
Choosing the wrong insurance company
It’s important to compare insurance providers to find the one that best fits your needs. Some insurers may specialize in certain types of coverage, such as high-value homes or properties in flood-prone areas, while others may offer more competitive rates for more basic coverage.
Low deductibles
Opting for a low deductible may initially be appealing because it means paying less out-of-pocket. However, because insurance companies assume a greater portion of the financial risk when a low deductible is involved, they balance potential payouts with higher insurance rates.
Poor credit score
Insurance companies often consider credit scores an indicator of financial responsibility and risk. Individuals with higher credit scores are generally perceived as less likely to file an insurance claim, while those with lower scores are viewed as riskier investments.
Multiple insurance policies
Protecting your investments—home, life, auto—with different insurance companies is not always the best bet, financially speaking. Insurance companies often incentivize customers to consolidate insurance needs by offering multi-policy discounts.
High-risk location
If your home is in an area prone to natural disasters like hurricanes, windstorms, or tornadoes, or if it is located in a high-crime neighborhood, insurance companies may consider it a higher risk, leading to higher premiums.
Aging home
Older homes can often require repair, renovations, or additional maintenance in general, and subsequently have a higher risk of structural issues, and plumbing or electrical problems.
Additional features
Certain features of your home (swimming pools, trampolines, or wood-burning stoves, etc.) can increase the risk of accidents or damage. Insurance companies factor in these additional risks when calculating premiums.
High-valued items
If you own expensive personal belongings or valuable collectibles, you may need additional coverage beyond the standard policy limits, which can increase premiums.
How to lower your homeowners insurance
From comparing rates and raising your deductible to improving your credit score and exploring discounts, there are steps you can take to save on homeowners insurance.
Compare rates
One of the most effective ways to lower homeowners insurance premiums is to compare rates from multiple companies. Obtain quotes from multiple insurance companies to ensure you’re getting the best possible rate, but keep in mind that the cheapest option may not always provide the best coverage.
Raise your deductible
The deductible is the amount you are responsible for paying out-of-pocket before your insurance coverage kicks in. By opting for a higher deductible, you assume more financial risk in the event of a claim, so it’s important to choose a deductible amount that you can afford to pay.
Improve credit score
Maintaining a good credit score demonstrates financial responsibility and can help you secure lower insurance premiums. Paying bills on time, reducing debt, and managing your finances responsibly can improve your credit score over time.
Bundle insurance policies
Bundling policies can result in significant savings. However, it’s important to ensure that the bundled coverage still meets your needs and provides adequate protection for your assets.
Discover discounts
Some insurers may offer discounts for military affiliations, a good claims history, or for installing safety systems throughout the home.5 Be sure to ask your insurance agents about any potential discounts you may qualify for.
An informed approach to unraveling homeowners insurance costs
Understanding how insurance premiums are calculated can influence the decision-making when determining how to reduce your insurance costs. Remember to review your policy periodically and make adjustments, as needed, to ensure you have the best insurance coverage at the price you are willing to pay. If you still have questions, contact your insurance agent for expert advice and guidance.
* We provide this information to help you understand insurance. Any coverage is subject to the terms of your policy. Please refer to your policy and declaration page for complete coverage details.
1 Loretta Worters. “Insurer Premiums Did Not Keep Pace with Inflation for Years.” Triple-I. Published 9 February 2023. Accessed 19 July 2023. https://www.iii.org/press-release/triple-i-insurer-premiums-did-not-keep-pace-with-inflation-for-years-020923
2 Debra Kamin. “Home Insurance Premiums Rise as Americans Flock to Weather-Worn States.” NY Times. Published 5 May 2023. Accessed 19 July 2023. https://www.nytimes.com/2023/05/05/realestate/home-insurance-climate-change.html#:~:text=Home%20insurance%20premiums%20are%20on,a%20data%
20and%20analytics%20provider.
3 Jeff Cox. “Inflation rose just 0.2% in June, less than expected as consumers get a break from price increase.” CNBC. Published 12 July 2023. Accessed 19 July 2023. https://www.cnbc.com/2023/07/12/inflation-rose-just-0point2percent-in-june-less-than-expected-as-consumers-get-a-break-from-price-increases.html
4 Kamin.
5 Ashley Kilroy. “How To Get Homeowners Insurance Discounts.” Forbes. Published 3 November 2022. Accessed 19 July 2023. https://www.forbes.com/advisor/homeowners-insurance/find-discounts/
