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Navigating Rising Homeowner's Insurance Premiums Nationwide

Published October 14, 2023 • • Buffalo, NY, USA

homeowners insurance

Becoming a homeowner is a monumental achievement that marks a cornerstone of our lives. Home; it's the place where cherished memories are created, family and friends gather, and dreams find a place to thrive. However, this also comes with financial responsibilities, and one of the most crucial aspects is the homeowner's insurance.

As we began blogging earlier this year, homeowners' insurance premiums have been increasing at historically high rates across the country. This shift in costs is due to a complex and multi-faceted chain reaction of events, starting with the pandemic era lumber shortages and continuing along to this day (Read our article from 2022 about inflation here)

Understanding the Surge in Homeowner's Premiums

homeowners price increase

The recent surge in homeowner's insurance premiums increases is due to several various factors such as:

  1. Disasters: The past year was a year of many large natural disasters across the United States, including hurricanes, wildfires and inland flooding. When you buy insurance, you are contributing to a pool of other insureds across the state/country.

  2. Claim History: If you've filed multiple claims in the past, especially within a short period, insurers may raise your premiums. This is how insurance companies maintain balance across their policyholders. Remember, most claims will "fall off", or not be eligible for underwriting, after a period of 3 to 5 years. Make sure you check with your individual carriers about their claim's history window.

  3. Market Conditions: It's important to understand that insurance is similar to market commodities like oil, or wheat. A bear market absolutely impacts insurance companies and how they negotiate their contracts with their insureds. Inflation from the Federal Reserve is also affecting insurance companies at a time when costs are continuing to rise due to the other factors we discussed above.

The Function of Replacement Cost

Let's examine what Replacement Cost is briefly, and how it can impact your homeowner's insurance premiums.

Replacement cost is a form of Loss Valuation that refers to the amount of money it would take to replace or rebuild a damaged or destroyed item or property with a new one of similar kind and quality. This value is used to determine the payout an insurance policyholder receives in the event of a covered loss, such as damage or destruction of property due to perils like fire, natural disasters, or theft.

The replacement cost is typically calculated based on the current market value of replacing the item or property at the time of the loss, taking into account factors like material and labor costs, any improvements or upgrades needed, and the associated fees or permits required for reconstruction. It's important to note that the replacement cost is distinct from the market value and actual cash value (ACV), which factors in depreciation and the item's age and condition.

While replacement cost provides the best possible coverage under the contract, it often is the more expensive option versus ACV. In short, Replacement Cost is good, but costs more.

Look for cost savings opportunities

There are a few opportunities to save on costs in this bear market, but also keep in mind that it may just be best to stay put with your current coverage if you have had a rather good experience with your current company.

  1. Consider shopping with an independent agent Unlike dealing directly with an insurance company, independent agents work with multiple insurance providers, allowing them to compare a wide range of policies and find the most competitive rates for your property.

  2. Maximize your discounts Check for anything that maybe you qualify for, such as a recently installed camera or alarm system. Some carriers might even offer credits for smart devices, like a Wi-Fi enabled thermostat.

  3. Review your endorsements carefully Reviewing your endorsements carefully can sometimes identify coverage that is no longer needed. Evaluate if the cost of the endorsement is right for you right now; and if you're willing to live without certain additional coverages.

  4. Contact your direct company If you have insurance with a company like Farmers, State Farm or Liberty Mutual, call your agent to see if they have any recommendations that can help reduce your premium.

Get in Touch Today

Facing rising homeowner's insurance premiums can be overwhelming, but you don't have to navigate it alone. Let Encompass Agency be your partner in finding the right insurance solution for your home.

Looking to discuss your insurance?

Connect with an Encompass agent to start your quote. Call now 800-484-9712

Available 9-4 EST Monday through Friday Serving the East Coast of the United States


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