How Homeowners Insurance Premiums Changed in the Last Decade

Homeowners insurance premiums continue to rise year after year, and this trend is expected to continue into the future.

According to the National Association of Insurance Commissioners (NAIC), as reported by ValuePenguin, homeowners insurance premiums have increased by about 47% in the last decade.

This is more than double the cumulative increase in the price of goods and services over the same period.

How homeowners insurance premiums changed in the last decade

In this article we’ll explore how homeowners insurance premiums changed in the last decade, the main reasons behind it, and what you can do to get your homeowners insurance premium down.

How Homeowners Insurance Premiums Increased Over the Last 10 Years

The average cost of homeowners insurance is $1,445 per year or $120 per month in the United States. The average cost varies from state to state – some states are well above the average while others are well below the average.

Research by ValuePenguin shows the most expensive state for homeowners insurance is Oklahoma where the average homeowners insurance premium is $2,559 per year. The cheapest state by comparison is Delaware at $598 per year.

The average homeowners insurance premium for California is $1,826 per year, which is above the national average of $1,445 per year.

Back in 2011 the national average cost for homeowners insurance was only $979 per year meaning it has increased by about 47% to $1,445 in the last decade.

Why Homeowners Insurance Premiums Increased So Much

In theory, and in a perfect world, homeowners insurance premiums should not increase by more than the annual rate of inflation. However, the annual rate of inflation in the last decade averaged below 2% per year.

Why has homeowners insurance premiums gone up by much more than the rate of inflation?

Here are the most important reasons why homeowners insurance premiums have increased so much in the last decade. Homeowners don’t have control over all of the reasons although there are some that homeowners can control or influence.

Natural Disasters and Extreme Weather Conditions

Insurance companies can lose a lot of money when a natural disaster strikes. It’s important to remember they’re running a business and not a charity. They somehow have to recoup the money they have lost.

The easiest way is to increase the homeowners insurance premiums of their clients. It may not be fair, especially if you were not directly affected, but it happens.

An increase in the Cost of Repairs and Replacements

Construction costs, including repairs and replacements, often exceed the rate of inflation. It costs more every year to rebuild your home or repair damages to it. Your insurance premium will automatically be adjusted to reflect this.

Trends in Your Area

An increase in crime, or claims (even if you didn’t file any claims) can increase the risk profile of your area. If your insurance company feels they are overexposed, they may increase premiums across the board as a way to reduce their risk or exposure.

Home Improvements or Renovations

If you improve or renovate your home it will normally increase the replacement value of your home, and your homeowners insurance premium as a direct consequence.

Your Claims History Has Changed

If you submit one or more claims within a relatively short period it can lead to an increase in your insurance premium. Your insurance company will factor your claim into your risk profile.

Your Credit Score Dropped

Many states allow insurers to take your credit score into consideration when determining your insurance premium. If your credit score has dropped, they may increase your premium as you’re viewed as a higher risk client.

Note that some states such as California prohibit insurers from using credit scores when calculating premiums.

You Adopted a Dog

Certain dogs are viewed as potentially aggressive which may increase the risk of a bite claim, at least according to your insurance company. Adopting a dog can result in a higher homeowners insurance premium.

Your Home Is Getting Old

The older your home gets, the higher the risk that you may experience electrical or plumbing problems, or that your roof may become an issue. As the risk increases, your insurance company is likely to increase your premium.

How to Get Your Homeowners Insurance Premium Down

Ask for a Better Premium

The first step should always be to ask your insurance company for a better premium. Just tell them you’re looking to save money but don’t want to leave them and if there’s something they can do to help you.

You can also ask them to let you know what, if anything, you can do to your property that will reduce your homeowners insurance premium.

Get Quotes From Other Insurers

Shop around to see if you can find a better deal. Insurance companies spend a lot of money trying to attract new clients. They want your business. If you approach a couple of insurers for a quote, you may very well get an offer that beats your current insurance premium.

When getting quotes from other insurers, make sure you’re comparing apples with apples! You need to be able to compare quotes so ask them to quote based on what you’re currently insured for, including your deductible.

Raise Your Deductible

The higher your deductible, the lower your premium. Just make sure you can afford a higher deductible should an unexpected event occur that you have to claim for.

Tip: It’s always a good idea to keep some savings in an emergency fund for such an event.

Skip Small Claims

If an insurance claim is relatively small, especially after taking your deductible into account, it’s often better not to claim for it. If you claim it’s likely your premium will increase, and you may also lose out on your no-claim bonus.

Make Annual Payments

If you can afford it, make annual payments instead of monthly payments. Your insurance company may be able to offer you a good discount if you pay your premiums annually.

Bundle Home and Auto Insurance Together

Instead of having your car insurance with one company and your homeowners insurance with another, get a quote on both from the same insurance company. You’ll find it’s often cheaper to have both home and auto insurance with the same company instead of separate companies.

Retiring? Working From Home?

The more time you spend at home, the less likely it is that you’ll be burgled. You’ll also be able to address problems that might lead to an insurance claim faster if you’re at home most of the time.

If you spend more time at home than you did in the past, ask your insurer for a new quote.

Improve Your Home Security

Security improvements such as an alarm system, bars on the windows, lightning protection, and smoke alarms may not only benefit your health and wellbeing. It can also save you money on your homeowners insurance policy.

Conclusion

Homeowners insurance premiums have increased by about 47% on average in the last decade, more than double the rate of inflation over the same period.

By understanding the reasons behind the huge increase and knowing what you can do to lower your premium, you’re not at the mercy of your insurance company!

At Avner Gat, Inc. we’re always looking out for our customers. As a trusted public adjuster with over 15 years of experience, we protect homeowners from the games and fine print that insurance companies are known for.

Call us at (818) 917-5256 if you’ve suffered damage to your property to find out how we can assist you.