As we are all painfully aware, the highest inflation rate in years has caused prices to spike on everything from gas to groceries. Homebuilding materials and the housing market have also skyrocketed, forcing the home insurance industry to respond.
Simply put, as products get pricier, it becomes more expensive to cover them.
Similar to why auto insurance rates go up, home insurance increases can be attributed to a variety of reasons due to no fault of the policyholder. Factoring in the economy, increases depend on where you live and who insures you.
Homeowners who have not already noticed a change in their rate can likely expect a modest increase in their next renewal.
Though some increases are unavoidable, there are a few offsets you can explore. Read on to learn more about why home insurance rates rise and what you can do to keep your monthly charge as low as possible while still getting the most from your coverage.
Contact a AAA insurance agent to discuss coverage options and savings opportunities.
Why Do Home Insurance Rates Increase?
Supply and Demand
Home construction increased to the highest level since 2006, according to the American Property Casualty Insurance Association (APCIA). After a lull in home improvements and renovations at the height of the COVID-19 pandemic, contractors and tradespeople are playing catch-up. As demand bounces back, it’s more challenging – and more expensive – to get repair work done, thus increasing the expense to cover it.
Building Costs
The cost of construction materials and labor are up. And shortages caused by bottlenecks in the supply chain exasperate the upward pressure on prices.
Hurricane Preparedness Guide
Your resource for vital information about staying safe before, during and after a storm.
Download NowValue of Homes Is Higher
When home values go up, the price of claims go up too. Insurance must rise to meet it.
Homeowners will likely start to see their Coverage A amounts increasing. Coverage A reflects what it would likely cost to rebuild your home at the rate of current construction costs in the event of a total loss. Some people mistakenly compare this to the market value of their home or how their town assesses their home value for tax purposes.
“Those can be very disparate values,” says Ray Eng, vice president of insurance for AAA Insurance. “It’s important to understand that [in order to] have sufficient insurance for your home during a high inflation period like the current environment.”
Find current mortgage rates, speak with an experienced home loan officer, apply for a home loan and save with AAA.
Storms
Natural disasters and the catastrophic losses they bring are becoming increasingly common. While storms could have an impact on your insurance, it mostly depends on where you live and how likely you are to be affected by them.
What You Can Do
“Insurers are strongly encouraging property owners to harden their homes and businesses to reduce potential loss and damage,” says Karen Collins, assistant vice president for the APCIA. “In addition, during the current cycle of extreme inflation, policyholders are encouraged to make sure they have enough insurance and are financially prepared should disaster strike.”
Keep up with seasonal home maintenance, such as professional roof inspection, removing dying trees and trimming large branches away from your property, to stay ahead of potential disasters.
AAA’s insurance pros recommend reviewing your policies with an agent at least once a year to make sure they are up to date. It only takes about 15 minutes and it’s free.
You may also want to consider updating your deductibles. If you can afford a higher deductible, it will lower your monthly premium.
Learn more about home and condo insurance from AAA.
Related Articles
Trending Articles
NEWEST ARTICLES
