No one likes to see their home insurance premium increase. Really, increases in any living expense can be frustrating and cause consumers to worry. Like anything, a home insurance premium does increase from year to year.
Still, it can be frustrating for homeowners to get their home insurance premium renewal and see that the cost has gone up. Many homeowners think, “What has happened? Nothing has changed. Why is my home insurance premium increasing?”
Knowing what is behind an increase can help homeowners feel better about their insurance and make better decisions about the coverage they need and want.
Annual Home Insurance Premium Increase Due to Inflation
Every year when insurance underwriters prepare your renewal policy, they increase slightly the amount of coverage you have on your home and on your personal belongings. This bump in coverage causes the home insurance premium to also increase.
The reason insurance companies automatically increase your coverage from year to year is to cover the rising cost to replace your home if you should be involved in a catastrophe. As constructions supplies, labor and materials increase in cost, so too does the replacement cost of your home, so every year insurers increase the coverage.
You can request that your insurance company decrease the coverage on your home but be prepared to provide or pay for a replacement cost estimate to make sure the home is properly insured to its value.
A Large Claim Can Cause a Home Insurance Premium Increase
Having a major home catastrophe is surely no one’s fault, but unfortunately, a major claim can cause a home insurance premium increase. Most insurance companies have a dollar amount threshold for claims and when that threshold is breached, a surcharge gets assigned to the policy at renewal.
Major claims can result from water damage, natural disasters or fire. At times, a state legislature may assign a surcharge to all home insurance premium renewals.
Small claims though are a different story. Claims that are under the threshold don’t result in a surcharge on your home insurance premium.
Catastrophe in Your Area Can Cause a Home Insurance Premium Increase
Sometimes you don’t have to file a claim to see your home insurance premium go up. Insurance companies sometimes issue rate increases across entire counties or several counties based on the claims history of the county or the projected risk.
For example, you may have never filed a water damage claim, but if you live in a county with a high number of water damage claims, you may get hit with a home insurance premium increase. This is because home insurance premium is based on a shared risk. So, rates are developed in consideration of not just you as an individual but also your neighborhood, county and even the state you live in.
Remodeling Your Home Can Mean a Home Insurance Premium Increase
Remodeling your home is exciting! Designing your own kitchens or bathrooms or living area is fun. A home remodel is a dream come true for many. But keep in mind that a home remodeling project can result in a home insurance premium increase.
New kitchen appliances, tile, granite counter tops and cabinets increase the value of your home. That increase in value can cause a small spike in your home insurance premium.
Similarly, if you build an addition onto the home, that too will need to be covered. An increase in square footage can lead to a home insurance premium increase.
An Older Home Means Higher Home Insurance Premium
If you live in an older home, or as your home ages, the cost of your home insurance premium can go up. This is because as the home ages, the risk for something going wrong increases. Just like any object, more years on a home mean more wear and tear, more deterioration, more likelihood that something will break or go wrong.
Everything on your house is subject to aging. The roof gets weathered, the pipes get worn, and so does the electrical system. As these systems age, the likelihood of having a claim increases. Therefore, insurance companies charge higher home insurance premium rates to older homes.
A Drop in Your Credit Score Can Be a Drag on Your Home Insurance Premium
If your credit score drops or takes a hit, be prepared to see a higher home insurance premium. Insurance companies use an Insurance Score as part of the underwriting of a home insurance policy.
The Insurance score uses credit history as a determinant of the likelihood to file a claim. If you have found yourself in a situation where your credit score has taken a dive, you may see your premium go up. But, the good news is, as your credit score goes up, you should see that increase go back down.
Putting in a Pool? Be Prepared for a Home Insurance Premium Increase
In some parts of the country, like in the sunbelt, a backyard pool is almost a must-have. Many homeowners enjoy the luxury of a refreshing dip in the pool or a weekend neighborhood pool party. But a backyard pool comes worth insurance costs.
Be prepared to pay more on your home insurance premium because of a pool. The reason is the increased liability homeowners take on when they have a pool. The chance of having an accident goes up so insurance companies charge for that higher risk in the form of a higher home insurance premium.
What to do About Home Insurance Premium Increases
If you are facing a home insurance premium increase, there are a few things you can do.
- Ask your insurance provider to do a policy review to make sure you are insured properly and getting the correct discounts. They should also make sure you have only the coverage you need
- Shop your policy around. Insurance rates differ from company to company.
- Carry a larger deductible. A higher deductible can decrease your home insurance premium.
