Homeowner insurance rates are on the rise in 2024. It’s not pretty, but there are some factors influencing prices that we should discuss. Read to the end for a quick snapshot of insurance reminders so you can do a self check-in to cover your assets.
Disclaimer: I am not a licensed insurance broker. This article is purely educational in nature and is based upon my personal experience as well as generally available information from Mr. Google.
The Anecdote
The Mathematician and I just received our annual renewal for our homeowners. Upon opening, I received a smidge of sticker shock. Our policy increased by 16%.
So what did I do? You know what I did. I dug into the details.
Sherlock Dabs
I immediately noticed the “limit of liability” for my dwelling seemed crazy high. This figure is the cap on dollars the insurance company will pay out to return your home to prior state after a claim.
My dollar amount is over $200,000 more than I paid for my new construction house in 2020 (I wish!). I also know that there are builders working teardown lots in my neighborhood and selling those houses, slightly smaller with one less bathroom, for $150,000 less than the insurance company is quoting. In addition, the teardown builders pay for the lot and squeeze out a profit so they are building these houses for substantially less.
The figure the insurance company is quoting is astronomical.
Then my eyes slide down to the next line: “Additional Structures”. Now, we have a garage and a deck, both attached to the house. We have no shed or other outbuildings. What in Sam Hill is this $72,000 going to cover?!
My agent’s response was, as I’ve come to expect, lackluster and unhelpful. There’s an algorithm, blah blah, the additional structures policy is standard even if you don’t have additional structures, blah blah.
Now, I’ve had on my “stuff to do someday” list item #287: have a broker take a holistic look at our coverage and shop around. Guess which item just shot up to #1?!
Increasing Costs
According to USA Today, the average annual policy costs $1,747 in Michigan. That’s somewhere between Hawaii at $469 (not including hurricane insurance) and Oklahoma at a startling $4,510 (hello hail damage!). When I started poking around, most sources cited double-digit increases in 2023, year over year. So what’s behind the increased cost?
Inflation. Yes, our old friend rears his ugly head again. The cost of materials AND labor has jumped in the last few years making claims more costly.
Reinsurance cost. Did you know insurance companies purchase insurance . . . on their insurance business? Yes, your insurance company likely purchases insurance to cover themselves in case of a catastrophic claims event to limit the total out of pocket expense. In health insurance, this setup would be similar to a health plan purchasing stop-loss insurance.
Natural disasters. Yes, this article wouldn’t be complete without mentioning climate change and its impact on insurance. States like California, Florida, Texas and Louisiana continue to wreak havoc on insurance companies bottom line, leading some insurance companies to pull out of those markets completely.
Your Annual Checklist
- Review your policy limits for each type of coverage. Are they high enough to meet your needs? Do you have any gaps in your coverage?
- Do you need any special riders? The big one is a special policy rider for jewelry. The standard policy usually has pretty low limits on jewelry so if you have any items valued over $1,000 you should investigate whether you need to additional coverage. Another rider you might want is water backup coverage.
- Do you have an inventory of all your stuff? I recommend you take five minutes each year and complete a video walk-through of your home to document your possessions. Digitally save receipts for big ticket items insurance would need to replace. Keep extra great documentation for any items or setups that are unique. (If you have three 80” 4k TVs in your media cave, I’m looking at you.)
Cost Considerations
If you want to flip over some couch cushions to look for nickels, here are some ideas on lowering your policy’s cost.
Shop them out
If you want to keep your costs down, you absolutely must shop around every so often. You can do this through an insurance broker or on your own. If you are very brave, you input your info into NerdWallet or a similar site where they will blast your information out to multiple companies who will then blow up your phone.
I went this route when we refinanced our house using LendingTree. Was it painful? Yes. However, I was able to talk to 4-5 reps in a day and land a screaming good rate with unbeatably low closing costs. (Rocket Mortgage: Ma’am, we’re pretty sure this company is losing money on you. We can’t match this offer.)
The bottom line here is the more comfy you get with your insurance company, the more likely your policy has some extra padding on their bottom line.
Discounts
Call and ask about discounts you might be missing out on. Unfortunately, the insurer has no incentive to proactively offer you discounts. You have to hunt those down on your own. Have you made any safety upgrades? Did you get a new roof? Did you add security cameras? Been a loyal customer for a hot minute? Military? Retired? Any of these could be associated with a discount.
Credit score
Get ‘em up up up. Your credit score is pulled and factored into your policy’s rate. Remember, in Corporate America, credit score = trustworthiness.
Check your deductible
When you file a claim against your home insurance policy, your future rates are likely to go up, for up to the next five years. With that in mind, what is the threshold at which you would actually want to file a claim?
If your deductible is $500, would you actually file a claim for $750 in damage? Or would you just cough up the extra $250 and skip the claim to save yourself the increased premium? If that’s the case, maybe you can increase your deductible to $1,000 or $2,000 and save some money on your premium at the same time. You just have to determine your personal deductible sweet spot.
Bundle up
If you have other insurance, see if you can get a discount for bundling your policies under the same insurance company. These policies might include cars, RVs, umbrella insurance, etc.
(Every article deserves a Ron Swanson cameo.)
Example: Back in 2016, I got fed up with our current auto policy’s cost at Carrier 1 and shopped out to Carrier 2, with a pretty significant savings. I did not move our home insurance policy. Six months later, my homeowners policy renewal went from ~$750 (bundled) to ~$1,100 (not bundled). I called and asked about moving my auto policies back over to Carrier 1. Lo and behold, Carrier 1 was able to drop my home insurance back down AND get pretty close to the policy cost on the auto policies. Moral: You have to shop to keep ‘em honest.
Thank you for joining me this week for our riveting refresh homeowner insurance! As always, I’m here to help with all your burning homeowner questions.
Photo by Mikhail Nilov
