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Home insurance premiums have been on the rise in recent years. If you’ve noticed your rates going up, you’re not alone. Many homeowners are seeing increases, even if they haven’t filed a claim.
Rates can increase for several reasons. Some are personal, like expired discounts or prior claims. Others are outside of your control, like inflation, rising building costs, or an increase in severe weather events.
Understanding the reasons why premiums may increase help you avoid surprises and make informed decisions about your coverage. In this article, we’ll break down the most common reasons why premiums go up, and what you can do about it.
Reasons why home insurance premiums go up
Expired discounts (especially after the first year)
One of the biggest reasons rates go up, especially for first time policy holders, is expiring discounts. Many insurance carriers offer new customer discounts to stay competitive. However, after your first renewal comes and goes, so does that discount, even if you haven’t modified your coverage or filed a claim.
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Home Replacement Cost vs. Market Value: What’s the Difference?
Whenever you purchase a new homeowner’s policy or want to evaluate coverage on your current policy, you’ll always want to know how to value your home to ensure you are covered properly. The problem faced by consumers is there are numerous ways to determine your home’s value. Depending on who you ask or where you look these numbers can be all over the place. That begs the question, “What’s the difference, and which one is right”.
Claims history
While insurance is a safety net, utilizing can come with a cost. When you file a claim, your insurance rate can go up at renewal. Certain types of claims, such as theft, water damage, or liability, are more likely to happen again. Because of this, your insurance carrier may increase your rates.
You may be wondering “well if I need to file a claim, how much will my rates go up by?
The honest answer is it depends. There’s no concrete answer here. Rates will likely increase based on the size and type of claim. If you can, avoid making small claims, especially if the payout is slightly over your deductible.
Property modifications
Price increases don’t always come from negative situations. Home improvement can raise your rates.
From renovations to adding more square footage, or adding higher quality or higher end materials, your premium increases to cover those new rebuilding costs.
Home insurance policies favor rebuild costs over market value, so when you make upgrades, your policy needs to reflect that.
Pools and trampolines are features that affect your rate. These are known as “attractive nuisances.” They increase the liability risk you face if someone is injured on your property. Increased risk means increased coverage, which means increased price.
The influence of inflation & materials
Premiums are heavily influenced by how much it would cost to replace or rebuild your home. When inflation hits the market, you’ll see it in your premium.
As the cost of building materials and labor rises, so will the cost to insure your home.
Increase in severe weather events and the aftermath
From hurricanes and tornadoes to earthquakes and wildfires, severe weather events and natural disasters are increasing across the nation.
When disaster strikes, insurance companies pay out a large number of claims. This leads to a ripple effect on home insurance rates across entire regions.
And after major storms or natural disasters, labor and materials are in high demand. This drives up rebuilding costs even further.
Severe weather doesn’t have to happen close to you for you to see the effects on your premium. Widespread claims can impact pricing across a state, or even the country.
Because of all this, insurance premiums may increase as carriers adjust to these rising risks and costs.
Factors that influence your premium
Now we know why premiums see an increase year after year. It can be helpful to understand how insurance companies calculate your rate in the first place.
Several factors go into calculating your premium, but the most relevant factors include:
Location: Certain states, cities, and ZIP codes face higher risks like certain weather events, crime, or other hazards. Higher risk means higher premiums.
Age of the home: Older homes may have outdated plumbing, wiring, or roofs. This makes them more prone to claims.
Materials used: Rebuild costs factor in materials of like or similar quality to the original materials used.
Claims history: From your personal history to the history of the home (if you’re not the original owner), insurance companies look at the number of claims made.
Coverage and deductible selections: Optional coverage/riders/endorsements and the amount of your deductible play a role in determining your premium.
Rate increases are common. However, they shouldn’t be a surprise.
Talk to your carrier
Insurance carriers should notify you, either through electronic communication or mail, that your rates will go up.
Some states, like Washington, will require companies to notify of changes starting in 2027. If your rates are increasing by 10% or more, not only will you be notified, but your carrier is required and has to explain why.
If you do not receive notice of an increase and you see one anyway, reach out to your carrier directly.
Your agent, if you work with one, is also a resource. Reach out to them, or you could even work with us at Goosehead to find clarity in your current policy.
Questions to ask your carrier
If your rates are going up and you weren’t told why, here are some questions you can ask your carrier or agent about to get more information:
What specifically caused the increase?
You may also try to ask if the carrier can provide a specific breakdown to help identify the cause
Does this price increase still match my coverage needs?
Price increases can happen regardless of you making changes to your policy.
What are some ways I can lower my premium?
If coverage doesn’t match your current needs, it could be a good idea to revisit your policy to make adjustments.
This list a starting point, so it may not have options for every scenario. If you’re ever unsure about your rates or coverage in general, you should feel empowered to contact your carrier or agent to get the information and clarity you need.
Ways to lower your premium
There are common strategies you can use to lower your premiums, such as:
Bundling policies: This is a common recommendation from carriers and agents. Even though you’re paying for at least two policies, the cost for the combined policies should cost less than if you were to have a standalone policy.
Shop around annually: If you’re new to a different carrier, you’ll be able to capitalize on other new customer discounts. Alternatively, switching carriers annually in general may help you get competitive rates, even if you’re returning to a previous carrier.
Make safety upgrades: While not guaranteed, some carriers may reward upgrades that are outside of regular upkeep. Modernizing your home to meet current safety codes, installing home security systems or water leak sensors may help you qualify for discounts or savings.
These are common ways people can find savings with their current insurance carrier. It’s worth repeating that asking about discounts is encouraged, as not all discounts are advertised to you.
Savings aren’t guaranteed but reviewing your policy each year can help make sure you’re not overpaying.
Insurance premiums have been trending upwards as time goes on. Understanding why rates go up
Frequently Asked Questions
Is it normal for home insurance premiums to increase?
Yes, it is normal to see price increases over time. From inflation, higher labor costs, supply chain issues, or an increase in claims being filed nationwide, there are many reasons why premiums increase.
Can home insurance rates go up if I didn’t file a claim?
Yes. Even if you’ve not filed a claim, rates can still go up. One prevalent factor that impacts homeowners directly is market inflation. Premiums are often based on rebuilding costs, and not always the value of your home. When materials become more expensive, your policy needs to be able to cover these changes.
How often do home insurance rates increase?
Usually, once a year. Home insurance rates are reviewed by companies before renewal and need to adjust prices based on the many factors we established in this article. Prices may not always go up, however, but currently prices are expected to increase.
Does switching insurance companies lower my premium?
Sometimes it can. Companies can offer competitive pricing as a way to encourage customers to switch. New customer discounts are a popular way to capitalize on lower rates with companies you’ve not done business with before. However, it’s important to go over coverage details, and not just price. A Goosehead agent can help you make sense of comparisons if you’re thinking about switching.
The contents of this article are meant as general information to help you understand personal lines insurance and not specific to a particular policy. Policies, coverages and discounts can vary by state and insurance carrier. To understand your coverage, you should speak directly with a licensed insurance agent or read your full policy contract. Call your agent or contact us at (833) 779-4090.
