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What Causes Rising Home Insurance Premiums?

What Causes Rising Home Insurance Premiums?

All homeowners should have home insurance on their properties. But did you know that only 6% of homeowners file home insurance claims each year?

Yet, even though such a small percentage of policyholders file claims, many homeowners experience rising home insurance premiums. Why do premiums rise?

Home insurance premiums rise for many reasons, and learning these reasons is critical if you own a home. Here is a guide explaining why premiums rise and ways you can save money on your home insurance policy.

Causes of Rising Home Insurance Premiums

Insurance costs rise for many reasons, but what causes home insurance costs to increase? Here are several common reasons you can expect to pay more for your home insurance premiums:

Increased Risk of Damages

Insurance companies base premiums on numerous things, including risk. The risk level they assume when insuring your home affects your rates. Therefore, your rates increase when your risks increase.

But what causes an increase in risk level?

A home’s age is an example of something that increases risks. A newer home has fewer risks of damage than an older home. As a result, your premiums might rise each year to accommodate for the added risks.

Life events might also increase the risks. For example, single people tend to pay higher rates for insurance than married couples. So, you might pay more if you get divorced.

Filing a Claim

The cost of home insurance also tends to increase after filing a claim. However, if you pay your policy for an entire year, you might not see a rise in your home insurance cost until the year is over.

After the year ends, the insurance company will renew your policy, but they might increase the rates to compensate for the claim they paid on your plan.

Insurance companies spend money when settling claims. This means you will likely pay higher insurance premiums if you file a claim. If you file too many claims, the insurance company might cancel your insurance policy.

More Local Claims

Insurance companies might also increase the rates if they experience a lot of local claims. For example, if a storm came through your town and damaged 100 homes, 100 homeowners would probably file claims.

Even if you didn’t experience damage or file a claim, you might feel the impact of all these local claims. Insurance companies might increase the rates for every policyholder in that area after encountering many claims.

Rising Building Material Costs

Another thing that leads to higher home insurance costs is the rising costs of building materials.

For example, if you insured your home for $300,000 one year ago, it was probably because it would cost $300,000 to rebuild your house.

When building costs rise, it costs more to build the same house. Therefore, it might cost $325,000 to build your home today. As a result, you might need to increase your structural coverage amount.

Additionally, insurance companies pay higher amounts when processing claims when building costs rise. As a result, insurance companies increase the premiums they charge to protect themselves from these added costs.

Ways to Save Money on Your Policy

You can look for ways to save money on your home insurance, and here are some ideas:


Bundling is a popular term with insurance plans, and it has a specific meaning. When you bundle insurance, you purchase every policy you need from the same provider.

Providers give discounts to people who purchase more than one insurance type from them. So, if you need auto insurance and home insurance, you might save money by purchasing them from the same company.

Of course, you can ask your current insurance company for a quote if you’d like to learn how much you can save through bundling.

Raise the Deductible

Secondly, you can increase the stated deductible on your home insurance policy. Your deductible only affects your pocketbook if you file a claim, as it represents the amount you spend out of pocket for the claim.

However, if you never file a claim, you won’t have to pay this amount.

Did you know that raising the deductible lowers your premiums? Insurance companies charge less for higher deductible plans because a higher amount decreases their risks.

You might understand this more by looking at an example. Suppose your home encounters $5,000 of storm damage. If you file a claim for the damage, you’ll pay the deductible while your insurance pays the rest.

If you have a $1,000 deductible, you’ll pay $1,000, while your insurance company pays $4,000. However, if you have a $3,000 deductible, you’ll pay $3,000 while your insurance company only pays $2,000.

Update and Maintain Your Home

You can also save money on home insurance by updating and maintaining your home. For example, if you put a new roof on your house, your insurance company might decrease your rates.

Installing smart home features in your home might also lead to lower costs. You can learn more about potential discounts and options for smart home updates.

Avoid Claims if Possible

It’s also important to avoid filing claims if possible. Each claim you file can impact your rates. So if you can avoid filing claims, you should pay less money.

Additionally, filing claims makes it harder to find a company to switch to if you decide to use a different company for your home insurance.

Switch to a Different Company

You might also find a cheap home insurance plan by switching to a new provider. You can call around or request quotes online to learn more about the rates other companies offer.

Look for Ways to Cut Your Costs

As inflation rises, you’ll also see rising home insurance premiums. Fortunately, you can use these tips to find ways to lower your insurance costs.

Your home is a valuable asset, so it’s crucial to keep home insurance coverage, but you shouldn’t overpay for your policy.

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