Everything you need to know about insurance basics, like coverage types, limits, cost and more.
Why Does My Homeowners Insurance Rate Premium Increase Every Year?
A lot of thought went into the purchase of your home. Its amenities, location, and overall design played an important role when you made the decision to place an offer on the house. Many of those same traits and features are referenced when an insurance company puts together a homeowners quote. And there are other key factors that they use to determine the cost of your premium.
If you’re wondering “why did my homeowners insurance go up?” you’re not alone. It can be surprising to learn that your rates have increased. It may be because your property’s becoming more valuable than it was a year ago. Or maybe you invested in an addition, boosting your home’s worth. Or did you file a claim on your home sometime last year? There’s a lot to learn — when homeonwers insurance increases every year, it’s important to understand why.
Why Homeowners Insurance Rates Go Up
Many of the same factors used to build your original quote are referenced annually to revise the rate of your premium. So, does homeowners insurance go up every year? That depends on a number of conditions and circumstances. We’ll review our top five reasons for a rate increase in detail — so you can better understand the factors in play when you receive an updated homeowners premium.
1: Filing Claims May Mean Higher Premiums
You buy insurance to help offset the cost of major expenses if the unexpected should happen. When it does, you’ll be glad to have coverage. But if you file a claim on your homeowners policy, your rates may increase. When something happens, you may ask yourself, “How much will my homeowners insurance increase if I file a claim?” Given that claims range from the small (think replacing a broken window) to the large (think reconstructing your kitchen after a fire), it can depend on the total cost of the claim.
And if you’re thinking about filing a small claim — that may not cost you much more than your deductible — it could be smart just to pay it out-of-pocket. Remember, you can always talk to your agent with any questions. They’re a resource you can trust to help you assess whether the type of claim you’re considering is worth filing.
2: Property Changes & Attractive Nuisances
When you put an addition on your home, you’re right to expect that its value will increase as a result. One factor in building a homeowners quote is your home’s square footage. And when property changes occur that boost your property value, you may see a homeowners insurance increase.
If you’ve made big investments into home improvement and updated your kitchen, it’s going to cost more to replace those expensive new items — per square foot — compared to what you had in the kitchen before. That’s one of the reasons why you’ll see a rate increase, but it doesn’t mean that you’ll find homeowners insurance increases every year.
When your property has a swimming pool or a trampoline, insurance companies consider these “attractive nuisances” that can pose a higher risk than homes without these items. Even backyard play sets can fall into this category. When attractive nuisances are added to your property, you may find a rate increase as a result. That’s because if someone injures themselves in the pool or on the swing set, you could be held liable. But if you’ve taken steps to prevent accidents like installing a fence around a pool, that may help reduce the rate increase.
3: Inflation Strikes Again
As inflation increases, insurance companies respond by raising rates. That’s because the cost of items in your home will cost more than they did last year. As the price for appliances and equipment escalates, rates will adjust as well. The insurance industry references the Consumer Price Index to measure inflation and adjusts rates accordingly. It’s one big reason why property owners find that their home insurance keeps going up year after year, even if nothing’s changed on their property.
4: Construction Costs in Your Area Affect Your Rebuild Cost
When a home is impacted by severe weather, you may need to rebuild your home or even replace it altogether. Unfortunately, when catastrophic weather hits, many homes in a given area can be impacted, which may force a spike in the cost of construction materials. And as you might expect, laborers are in higher demand in those areas, and their rates typically escalate in the aftermath of a hurricane, wildfire or tornado. And if you’ve got an older home, the cost of getting your home to be rebuilt according to modern building codes can be costly.
5: Your Insurance Score Dropped
A key component used to develop your total premium, your insurance score is a lot like your credit score — but for insurance purposes. It’s a calculation based on your likelihood of filing a claim during a given coverage period. And your credit history is actually part of that calculation. Databases that hold details on previous property claims are used to factor your premium. These are some of the same factors that go into building your auto insurance score, as well.
If you improve your credit score, you can help to minimize annual home insurance price increases.
How to Lower Your Homeowners Bill
There are a lot of ways that you can help to control the overall cost of your insurance. If you're left wondering why your homeowners insurance keeps going up, reach out to your agent to learn more about bundling your insurance.
You can also save on your bill by going paperless. You can enroll for paperless billing through My Account or the MyAmFam app. Either option will allow you to access your policies, insurance cards and bill-paying options — like paying your premium in full — that can save you even more money. And by making adjustments to your home, like installing an impact-rated roof or smart home security system, you may be able to save even more on your premium.
To minimize that home insurance increase every year, be sure to check in with your American Family Insurance agent. They’ll help customize your policy and get you the discounted coverage you need. And they’re experts at finding ways to save on your policy.
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