In 2023, homeowners in every part of the country saw their insurance rates go up by hundreds, even thousands of dollars in certain states.
In fact, home insurance premiums were up an average of 21%, according to a Policygenius analysis of policy renewals from May 2022 to May 2023. For homeowners whose premiums went up, the average increase was $244.
5 factors behind rising home insurance premiums
If you're one of the 94% of homeowners who renewed their policy last year just to find out your home insurance premiums went up, you’re probably wondering how this happened. Here are a few of the most common reasons your homeowners insurance rates went up.
1. Coverage changes due to rising construction costs & inflation
In some cases, your insurer will increase your rates because of something within your control — like if your roof needs to be replaced or you filed a claim recently. But the fact of the matter is home insurance premiums are going up everywhere due to the increased cost of labor and construction materials thanks to supply chain issues and high inflation that started in 2020.
Your rates are based heavily on how much dwelling coverage is in your policy — this is the part of your home insurance that pays to rebuild your home if it's damaged or destroyed. Higher rebuild costs due to inflation means homes are requiring higher dwelling coverage limits to keep up with the rising prices.
This has led to higher home insurance rates across the board, though there may be some hope on the horizon.
According to the U.S. Bureau of Labor Statistics, the rising cost of construction materials we saw over the last three years is finally beginning to taper off:
Material goods for new residential construction only increased 4% in 2022, compared to 20% in 2021.
Asphalt roofing materials only increased 6% over the last year, compared to 15% in 2021.
Lumber and wood was down 42% over the last year.
However, the labor shortage in the construction industry continues to remain a problem for insurers — and in turn, homeowners. There were 431,000 construction job openings as of September 2023 nearly three times the number expected by the U.S. Bureau of Labor Statistics.
2. More extreme natural disasters
From worsening hurricane and wildfire seasons to unexpected cold snaps in Texas, the home insurance industry has experienced record-setting claim payouts and financial losses over the past few years. As a result, many insurance companies are increasing rates to pay for these losses and to ensure they don’t go bankrupt after future climate disasters.
As of September 2023, the U.S. saw 23 billion-dollar disasters — a record for this point in the year. And in just the first half of 2023, the property and casualty insurance industry saw $24.5 billion in losses — this compares with $6.6 billion in losses for this same time period last year.
In states like Florida, Texas, and California that are at high risk of hurricane, tornado, and wildfire damage respectively, construction and labor prices have a tendency to surge in affected areas due to increased demand and shortened supply.
So if you live in one of these high-risk areas out West or in the South and your rates recently went up, you’re likely getting hit by both price inflation and the higher reconstruction costs where you live.
3. Your home's risk changed
Homes in areas prone to extreme weather generally cost more to insure than homes in areas less impacted by Mother Nature due to both the higher amount and increased frequency of claims.
But it isn't just homes at risk of hurricanes or wildfires that are paying more for insurance. In fact, several states with the highest average rate increases at renewal the last few years are in the middle of the country — in large part due to the higher incidence of hail and wind damage claims in those states.
As climate change continues to alter weather patterns all over the country, certain areas that insurers used to consider to be low risk are now viewed as the opposite, and homeowners in these areas may suddenly be seeing steep premium hikes as a result.
4. Your claims history
Another factor that determines your home insurance rates is your insurance score, which measures how statistically likely you are to file a claim. Carriers typically determine your insurance score by combining your credit score and claims history, among other factors.
A lower insurance score generally means higher premiums, so if your credit took a dip or you filed a claim or two in 2022, that may be the reason your homeowners insurance went up.
5. Liability risks
Insurance companies consider swimming pools, trampolines, and even house pets as “attractive nuisances” since they attract children onto your property and put them at risk for injury. If you install a pool or add a new four-legged friend to your family, your insurance company may increase your rates to offset the higher probability of expensive liability claims.
3 ways to lower your homeowners insurance rates
If you noticed your home insurance rates went up recently and you’re wondering if there’s anything you can do to get them back down, you’ll be relieved to hear that yes, there is.
Following the steps below is a good starting point as you look for ways to save on homeowners insurance.
Ask about discounts
If the discounts section on your policy’s declarations page is more or less empty, make sure to ask your insurance company if there are any you are currently eligible for. Some popular discounts include:
Multi-policy discount: If you have two or more policies with the same insurer, like home and auto insurance, this can trim anywhere from 15% to 30% off premiums, depending on your insurer.
Claim-free discount: Some carriers will provide discounts if you go a certain number of years without filing a claim.
Protective devices discounts: If your home is fitted with deadbolts, smoke detectors, fire extinguishers, fire and burglar alarms, or other protective features, most insurers will reward you with lower rates.
First-time homebuyer discount: Most home insurance providers offer discounts to both new homebuyers or owners of recently built homes.
Senior citizens discount: If you’re 55 or 60 and older, your insurer may offer up to 10% off your premiums.
Loyalty discount: If you’ve been a policyholder with the same insurance company for five years or more, you may be eligible for a loyalty discount of up to 10% off.
Switch to a higher deductible policy
Increasing your policy deductible generally lowers your home insurance premiums. If your rates recently went up and your deductible is currently set to $1,000, consider choosing a higher deductible to get those rates back down. If your home doesn’t face many hazards or you’ve owned your house a while without having to file a claim, then it may be in your best interest to choose a high-deductible policy.
Re-shop your homeowners insurance
You should consider re-shopping your home insurance every year to make sure you aren’t missing out on better coverage or rates with a different insurance company.