Seeing your insurance premium increase at the beginning of the year is both confusing and frustrating. Your situation hasn’t changed, your location hasn’t either – so why did your rates increase?
There is a multitude of reasons for the homeowners insurance increase, some within your control and some that can’t be helped. Anything from hurricanes increasing in your area to getting a new family pet can lead to your insurance company raising your rates. But is there anything you can do to bring your rates back down?
As with the reason for the initial increase, it all depends on the situation. Each situation is different, and each rate increase comes from different conditions so it makes sense that bringing your premium back down is situational as well. There are options that could help bring your insurance back down to a manageable price, but they all depend on you.
How much should my insurance increase each year? There’s no set amount that your company will increase your insurance at the start of the new year. You can tell by looking at your current living situation if your rates will increase by a great amount or a few dollars – but it’s still situational.
Why is my home insurance so high?
Insurance companies look to be assured that they will receive their money back from you by the end of the year. If they feel as though factors have increased the risk of your property losing them money, they will increase your homeowners insurance.
But what specific factors might have led to your home insurance being increased? Anything from natural disasters to burglary lead to high insurance rates. In some cases, your insurance might see your new family pet as a liability. There’s a whole plethora of possible reasons – some in your control and some not. Here is a list of common reasons for your premium increase:
- Credit rating – Insurance companies probably have the ability to check your credit score and see how reliable you may be with their money. If your credit score has dropped recently, your insurance company could take that into consideration and raise your rate.
- Swimming pool, trampoline, etc. – While these additions might seem fun, your insurance company may see them as an increased risk of injury. The risk factor associated with these outer additions might have led your homeowner’s insurance premium to increase.
- Too many claims – If you make a certain number of claims within a specified window of time, your insurance company might add a surcharge to your premium. Increased claims from a customer leads to them being associated as a higher risk of loss. The more claims you make, the more of a liability your insurance will see you as increasing your homeowner’s rates.
- Economic inflation – One of the factors that you can’t control is economic inflation. When there is more money in the economy, the money loses value making things more expensive. When inflation increases, the insurance rates will follow.
- Severe weather – This does not mean one storm will increase your insurance rates. If your property is in a storm-prone area, however, you may see an insurance increase at the start of the new year. The increase of severe weather in recent times leads to more areas falling into weather prone zones. Your area may have been added to such a zone by your insurance company.
- Neighborhood trends – Neighborhoods might find themselves more prone to burglary and crime rates than in previous years. This increase in crime will not go unnoticed by your insurance company. If your neighborhood has experienced a raise in crime over the past year, your homeowner’s insurance could have used this to raise your insurance premium.
- Home updates – Adding to your home, redoing your basement, or getting a pet can all be used by your insurance as reasons to increase your premium. If you have added more value to your home, your insurance will need to cover more. To avoid losses associated with this increase, they might increase your rates.
Any changes made to your home or your life throughout the year may be reasons why your insurance has increased your premium. If it can be justified by your homeowner’s insurance as a reason why they might lose money on your investment, they will increase the premium to cover possible future expenses.
What you can do to decrease your bill
There are some options you can pursue that will help to decrease your insurance bill so if your homeowners insurance has increased, do not worry. It can be daunting to see the yearly increase despite not knowing what might have caused it.
One of the options you can use is to increase your deductible. By increasing your deductible, you will need to pay reduced insurance premiums. Your yearly increase may be lowered or even nonexistent depending on the amount you put down for your deductible. One drawback of this choice is the out-of-pocket expense it contains. It will cost you more of your own cash to cover repairs, but it may help in the long run, decreasing your insurance costs.
Another choice you have is to lower your insurance coverage. Yes, this raises the possibility of paying more in the event of an emergency, but you will end up paying less yearly for your insurance bill. Insurance is a gamble and you’re going to be required to pay more in one aspect or another.
Don’t be afraid to look for discounts! There are some discounts offered by insurance companies that you may qualify for. It can’t hurt to research – you may end up finding something that decreases your insurance rates.
Homeowners insurance is tricky and sometimes you may never know the exact reasoning behind your insurance premium increase. Each situation is different and so is the reason for the rate increase, but that doesn’t mean you’re stuck. Contact your insurance company to find out why your rates were increased and look for options you have to decrease your premium.