Homeowners are required to have home insurance to protect their property and possessions in the instance that a natural disaster strikes, a robbery takes place, or the home is damaged. When rates increase out of the blue, there are numerous explanations for the sudden spike in pricing. Clients sometimes will experience higher premiums upon their annual policy renewal, even if they haven’t filed a claim and had the same rates for years. While this might come as a huge surprise, here’s why your premiums could be on the rise.
Your insurance score could’ve gone down. Home insurance rates are determined by an individual’s insurance score. This score statistically measure the likelihood that the individual would file a claim. The score is composed of a combination of your credit score, your claim filing history, and the safety features included in your home. An individual with a low insurance score will have high premium rates.
When new clients sign up for an insurance policy, carriers will assign them an insurance score at the beginning of the application process. With every annual renewal, carriers will update your score and consequently, your rates may be adjusted. To avoid rate adjustment, Bickle recommends that clients work hard to maintain a healthy credit score. Staying above 700, and avoiding filing claims are both safe ways to avoid unexpected insurance rate spikes.
Occasionally, insurers will conduct a home inspection upon annual policy renewals. Even the best clients, the ones that pay their premiums on time and never find themselves filing claims, still might be subject to an inspection.
During an insurance inspection, the integrity of the home’s exterior is checked. The inspection focuses on the exterior walls, the roof, and the foundation. After the inspection has been completed, the insurance provider might consider your home to be in hazardous or in bad condition. The insurance company could require that upgrades are made and may ask for them to be completed in a certain timeframe. Often, avoiding making these upgrades will result in an increase on your next bill.
If you or your neighbors are filing a lot of claims, you might see your rates increase. If you continuously file claims to help cover the cost of even minor repairs, your insurer may quote you a higher premium rate. On the flip side, policy holders that never report damages will experience lower rates.
Another impacting factor that plays a role in increasing home insurance rates is your geographic location. How often your neighbors or people in your ZIP code file claims will actually impact your personal rates. For example, those who live in high-crime areas that experience numerous robberies will have higher rates. The same case goes for those who reside in areas that experiences claims do to inclement weather. Unfortunately, having a clean claims history won’t save you insurance dollars if you live in a high-traffic claim filing neighborhood.
There are certain upgrades that can cause your home insurance premiums to elevate. Adding a swimming pool or trampoline, or even a swing set, are all upgrades that are considered to be called an “attractive nuisance.” There are safety hazards associated with swimming pools and trampolines because of the increased risk of bodily injury. This means that homeowners would most likely need to increase their liability coverage. When you expand your coverage, your insurance rates will rise.
Part of determining homeowners insurance is dependent upon the current cost of construction repairs. The cost to rebuild your home is called the dwelling coverage. This plays a huge part in determining the price of your insurance premiums. With this being said, the higher your homes dwelling limit is, the higher your premiums will be. Since the pandemic started in March of 2021, the price of construction materials and labor cost have skyrocketed. There is high demand in the construction industry and this could be the culprit of your increased rates.
The reality of increased insurance rates is that some insurance companies simply raise their rates. Trends indicate that rates are continuing to increase industry-wide. This increase may be resultant of the insurance industry’s recent record highest claims filing year, in which billions of dollars of insured losses were covered. As more clients are “dipping” into the pot to cover their damages due to the California wildfires or the inclement weather storms across the Midwest, insurance rates are inevitably rising.