Have you noticed a change in your home insurance premiums? You're not alone. A perfect storm of market forces has driven up the cost of building homes – along with the cost of insuring them for repair and replacement. Here are some new and established reasons why your homeowner's insurance premium may be rising.
You filed a claim
If you file a claim on your homeowner's policy, your rates may increase. Rate increases depend on the total cost of the claim.
When you make an addition to your home, you’re right to expect that its value will increase as a result. Also, when property changes occur that boost your property value, you may see a rate increase.
As inflation increases, insurance companies respond by raising the rates. As the price for your home’s appliances and materials inflates, the rates will adjust as well.
Home Rebuild Cost
When a home is impacted by severe weather, you may need to rebuild your home or even replace it altogether. If you’ve got an older home, the cost of getting your home to be rebuilt according to modern building codes can be costly. Also, when catastrophic weather hits, many homes in a given area can be impacted, which may cause a spike in the cost of construction materials and laborers.
Your Insurance Score Dropped
A key component used to develop your total premium is your insurance score, which is a lot like your credit score. It’s a calculation based on your likelihood of filing a claim during a given coverage period.
Most recently homeowner's insurance has seen an additional spike due to three major factors. Those include:
Low housing inventory and historic demand
In April 2021, there were 1.16 million unsold homes on the market, down 20.5% from the previous year. That inventory shortage has caused the U.S. median home price to surge 19.1% in the past year.
A shortage of skilled labor
The home-building industry is currently facing a shortfall of at least 200,000 skilled trade workers. About 60% of surveyed builders report a skilled labor shortage.
Skyrocketing materials costs
Between 2020 and 2021, the cost of construction materials rose 11.9%. Lumber played an outsized role in that increase, rising a staggering 42% over the past year.
Nobody likes paying more than they have to. You may qualify for policy discounts that could reduce your premium. Contact a Texan Insurance agent to learn more.
Source: National Association of Realtors
Source: Home Builders Institute
Source: CoreLogic Quarterly Construction Insights (Q2 2021)