Homeowners Insurance Cost

Reasons Behind Rising Costs

In most cases, both your annual property tax and your yearly insurance coverage will increase each year. Taxing authorities do this to provide for and improve things like roads, sewage systems, libraries, and schools. Insurance providers raise the cost of coverage to keep up with the increasing cost to repair or replace your home—due to inflation.

The age of your home will also affect the price of your coverage. Older homes have a greater need for repair and maintenance. The absence of security and safety features like lights and smoke detectors can impact your premium. Also, any claims you filed may increase the cost of your coverage as your insurance risk profile changes. Even if you did not file a claim, if you live in an area where the insurer had to pay for damages received by others, the company may raise their rates to all homeowners.

Increase Homeowners Deductible

Your deductible is the amount of risk you agree to accept before the insurance company starts paying on a claim. As the cost of your policy increases, it may no longer make sense to let the insurance company assume all the risk.

For example, if you have a low deductible of $500 or $1000, consider raising it. You could save a significant amount of money on your monthly premium costs by assuming more financial risk of your own. The biggest consideration is objectively considering how much cash you’d have on hand to pay the deductible in the event of an emergency, like a full roof replacement.

Be aware that insurance companies will penalize customers who file one or more small claims each year or year after year. A larger deductible helps prevent the filing of smaller claims. A history of claims can result in the policyholder losing discounts, major premium increases, and possible policy cancellation. A long claims history will follow you from insurer to insurer, which will cost you when you shop around.

Become a Better Insurance Risk

Risk plays a big part in determining your insurance costs. The riskier a person or property is to insure, the higher the price tag for insurance climbs. Ask your insurance agent what you can do to make your home less expensive to insure. Making changes that reduce the risk of damage in windstorms and other natural disasters is one example. Another is updating old wiring or heating systems, which may reduce your risk of fires, therefore, reducing your premiums.

Insurers shy away from some risks. For instance, owning certain types of dogs such as Rottweilers, Doberman pinschers, and pit bulls can limit or void your policy. Owning a swimming pool or a trampoline can increase your cost of coverage. Read the fine print in your policy under the “Conditions and Coverages” sections, so you know all the things that are excluded from coverage. You may opt to buy additional coverage to protect yourself from certain exposures.

Understand Your Homeowners Insurance Policy

Your home is your biggest investment. Make sure it’s adequately protected from risks you cannot afford to cover yourself. Providers will send several explanatory pages with your policy. Take the time to review these pages. Use the internet to search for any terms or coverage you don’t understand. Of course, if all else fails, call your agent and ask them what the coverage items or listed deductible mean. This annual review will help you understand where you are and are not protected.

Also, check to see what supplemental coverage you may need. This review is especially important if you live in an area that experiences severe weather situations, such as tornadoes, hurricanes, earthquakes, sinkholes, wildfires, or floods. Some items like wood privacy fences, pool or patio screen enclosures, and freestanding sheds may not be covered in the event of a loss. If you made substantial improvements or major purchases, make sure you have enough coverage to offset replacing those items.

Once a year, before your homeowner’s insurance policy is due to renew, dig out the current policy, read through all the details, and call your insurance agent to discuss any changes in your situation that occurred during the year. Make sure you’re addressing any new insurance needs and removing any coverage that’s no longer necessary.

It makes no sense to buy insurance to protect yourself against risks you are unlikely to encounter. For example, earthquake coverage in a non-earthquake zone, or a jewelry floater to your policy if you don’t own expensive jewelry.

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