Why Did My Homeowners Insurance Go Up?

Home insurance prices continue to rise after a 7% increase in 2022. Homeowners can expect an additional 9% increase in 2023. Some factors causing the price increase are outside your control, but you can take certain steps to minimize the effect on your wallet.

You can offset some of these increased costs by focusing on your claims history, credit score, and which insurance company you choose.^[1]

Here’s everything you need to know about higher rates and how to get the best deal on coverage.

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Big-picture factors affecting home insurance prices

Homeowners insurance companies earn money by charging customers premiums for coverage and then investing the money to make additional returns in anticipation of future claims. When insurers pay more in claims than they earn, the company experiences a loss.

Over the past two years, insurance companies have suffered significant losses, which can affect their ability to pay claims and meet other financial obligations. To compensate for the financial losses, insurance companies increase premiums.^[2]

Most factors causing prices to increase are external factors that you can’t control, creating a frustrating cycle for homeowners. But even though you can’t stop the price increases, it’s essential to understand why it’s occurring so you can prepare for the costs.

Here are some of the key factors affecting home insurance rates.

Inflation

Inflation continues to increase the costs of consumer goods like gasoline, food, travel, and cars, so naturally, inflation also affects insurance costs.^[3] When prices increase due to inflation, it affects all sectors of the economy, including homeowners insurance premiums.

Severe weather

Severe weather is becoming increasingly common, in part due to climate change. Insurance companies determine premiums based on the risk of a home insurance claim, and severe weather events are often the most common reasons for cost increases.^[4]

You can expect to pay two and a half times more than homeowners in low-risk locations if the Federal Emergency Management Agency (FEMA) determines your home is in a “high-risk” area due to extreme weather.

Natural disasters

As weather patterns become less predictable and instances of severe weather increase, natural disasters occur more regularly.

Wildfires, hurricanes, and tornadoes can lead to extensive home damage, which costs insurers more than typical claims.^[4] In preparation for the increased costs, insurers charge homeowners more for coverage.

Home prices

Home prices have increased dramatically over the last few years, and construction, labor, and building materials costs have increased alongside them, which means home insurance costs have also increased.^[5]

Property and homeowner-related factors affecting insurance rates

Home insurance increases might also be due to factors related to your property, financial profile, or claim history.

The good news is that some factors affecting your home insurance rates are in your control, so you might be able to make changes to decrease the costs. But even if you can’t, it’s helpful to understand how different factors affect costs to avoid surprises in your bill.

Here are the property-related factors affecting your insurance costs.

Claims history

Insurers can use CLUE (Comprehensive Loss Underwriting Exchange), a claims-information report, to review your claims history and determine how risky it might be to provide coverage.

If you have personal property insurance claims on your account, it can cause your premiums to increase.^[6]

Home age

Your home’s age, including its electrical, heating, and plumbing, can affect how much you pay for insurance. Older homes typically cost more to insure.^[7]

Home construction

The construction of your home can affect how much your home insurance costs.

For example, if you own a home on the East Coast, it might cost less to insure a brick house since it can better handle wind damage. But if you live in an area with earthquakes, homeowners insurance rates might be cheaper for a house with a wooden frame since it’s better suited for earthquakes.^[1]

Your credit history

Your credit history affects your home insurance premium since insurers factor credit scores into a credit-based insurance score to determine how risky you are to insure.

Homeowners with higher scores can usually secure lower insurance rates. The reverse is also true: Homeowners with lower scores often pay more for coverage.^[1]

Your insurance history

If your homeowners insurance policy lapses or you fail to have coverage, your insurer may consider you high risk, which often results in rate increases. It can also make finding a policy from other insurers more challenging once you have a lapse in coverage on your record.

Average homeowners insurance costs by state

Your location is one of the most critical factors when it comes to the cost of home insurance. Where you live in the United States determines the likelihood of severe weather, natural disasters, and rebuilding costs, which insurers consider as they determine rates.

Here’s how much Americans can expect to pay for home insurance coverage in the following states.

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10 cities with the most expensive homeowners insurance

You can expect to pay more for coverage if you own a home in a city with a high risk of severe weather or natural disasters.

The following cities have some of the most severe weather risks, like flooding and tornadoes, and often see severe home damage. Insurers know this and don’t want to keep paying claims in these areas, as it’s not profitable, so they increase rates drastically.

Here are the most expensive cities for homeowners to find insurance coverage.

How to lower your home insurance costs

Even though you can’t change the effect of inflation or natural disasters, you can take other steps to lower the cost of homeowners insurance.

Here’s how to lower your home insurance premium, especially if you’re dealing with a rate increase:

• 

  Comparison shop

  Comparing quotes from multiple insurance companies is one of the most effective ways to lower your insurance premium when you’re looking for a new policy. Check the typical rates for your state and gather quotes from a handful of companies before selecting an insurer.

• 

  Opt for a higher deductible

  Your deductible is the amount you’re responsible for paying when you file a claim. Higher deductibles equate to lower insurance premiums since you agree to cover a more significant portion of future claims.

• 

  Apply for discounts

  Ask your insurance agent about potential discounts for coverage. For example, you may qualify for a reduced rate if you’re 55 or older or bundle insurance products, like auto and homeowners insurance policies, with the same insurer.

• 

  Weather-proof your home

  Check with your insurance company about steps you can take to make your home and the things in it more weather-resistant. Adding storm shutters or reinforcing your roof might secure a lower rate, for example.

Home insurance costs FAQs

Methodology

Insurify’s team of data scientists analyze millions of home insurance quotes and weigh publicly available reviews, claims payout rates, complaint indexes, financial strength scores, company reputations, and proprietary quoting data. Our editorial team applies this insight to inform our unbiased reviews and recommendations.