Homeowners Face Rising Insurance Premiums
Higher Material, Labor Costs Cause Increased Premiums
Insuring a home is getting more expensive, with homeowners paying on average $1,398 per year. From 2017 through 2020, homeowners’ insurance rates increased about 11.4%. More of the same is happening in 2021. In the third quarter, premiums increased on average 6.6%. Some markets, including California and Florida, have seen homeowners’ insurance rates jump as high as 25%.
Factors which are impacting the real estate market as a whole are also driving increases in home insurance premiums. These include higher materials costs, supply-chain delays, and labor shortages. This is making it more expensive for insurers to repair and rebuild homes.
Natural Disasters Coming at a Faster Rate
Homeowners’ insurance rates are also up due to an increase in natural disasters. From wildfires to floods, disasters are happening more frequently and have been more severe. Since 2017, home insurers have had over $370 billion in insured damage. The insurers are passing along the increased number of disaster claims to policyholders in the form of rate increases.
Last week Travelers (TRV), which is the first insurer to report earnings, told Wall Street that labor and material price increases have led home insurance costs to exceed its expectations. As a result, Travelers said it will continue to increase rates. Allstate (ALL), which reports earnings in early November, previously said it was being hit by higher repair costs.
Options Are Available for Homeowners
Homeowners facing increased premiums do have ways to reduce the cost of insurance. Many insurers provide discounts for making home improvements which will limit the damage from severe weather. For instance, installing hurricane shutters or elevating HVAC equipment to prevent damage from flooding, can get homeowners premium discounts.
There are also government funded programs to help cover the cost of homeowners insurance such as the federal flood-mitigation assistance program. The program is for people who have suffered multiple floods. Grants are given to help homeowners reduce the likelihood of future flooding by making improvements such as raising the home’s elevation. It also pays for homeowners to revisit their policies annually to see if there is a cheaper alternative. After all, with prices rising pretty much everywhere, homeowners need to find more ways to save.
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