Your home insurance is killing you, isn’t it? Here’s the solution

Dear Chuck,

Our homeowners insurance continues to rise. My husband asked me to find a new insurer or negotiate better rates. What is the best approach?

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Stressed About Home Insurance

Dear Stressed About Home Insurance,

A friend of mine recently requested prayer after many of the buildings that housed their commercial agricultural business were burned to the ground by a massive fire. It turns out that the insurance company has a very different evaluation of the present value of the insured buildings, and it is much lower than the company needs to be able to rebuild! It was a reminder to me to be diligent about understanding and managing our insurance coverages! 

We did some research that I hope will be helpful to you and many others who may be out of date with coverage and costs.

Why home insurance rates increase

• Increase in the number of natural disasters and extreme weather.
• Soaring construction/rebuilding costs due to labor shortages and material costs.
• Declining competition in the insurance market.
• Claims history – especially multiple claims in a short period of time.
• Risk assessment.
• Credit report and debt.
• Changes in building codes.
• Converting to a rental property or running a business from the location.
• Vacancy: more vulnerable to vandalism, weather damage, and maintenance issues.

All companies evaluate the risk of insuring a home and try to price it so they can make money. Besides the threat of severe weather, insurers consider crime rates, fire protection services, and proximity to high-risk areas. Many homeowners and potential homebuyers cannot afford the expense of insurance on top of mortgage payments, taxes, HOA fees, and routine maintenance. In addition, there is a correlation between credit history and claim likelihood. That is an incentive to stay current on bills, pay taxes on time, and not accumulate a lot of debt!

Resale is especially difficult in areas where coverage is limited or denied. Few buyers want to own a home/business that they cannot insure. When insurers have higher-than-expected payouts for a region, they raise rates in order to remain financially stable. Renovations and additions, especially custom or luxury finishes, energy-efficient features, and smart technology, add to the cost.

Comparison shop every year

I was a loyal insurance customer, having only used one company for car and home coverage since 1979! Then they raised our rates. It no longer mattered how long I’d been faithful to them. So, a friend, an independent broker, found us a policy in 24 hours at nearly half the cost of the quote from our current provider! I was shocked and delighted.  

Over time, insurers raise premiums. Unless comparison shopping is conducted annually, you may end up paying more than necessary. The key is comparing apples to apples. A lower premium might cover less, and a great discount might start with a higher premium.

How to get the best deal

Homebuyers should request all costs of insurance before making an offer on a house, condo, or commercial building. Get a thorough inspection to verify conditions that may impact coverage.

• It is possible to reduce premiums when certain coverage requirements are not mandatory.
• Keep in mind the cost to rebuild should the unexpected occur.
• Increase your deductible, make your home more secure, and skip small claims.
• Ask about lesser-known discounts, including home improvements.
• Build your credit score.
• Rethink the purchase of trampolines and dogs — they can cost you.
• Want to remain loyal? Negotiate your premium after comparison shopping and see if bundling will reduce your cost.

NerdWallet says that multi-policy discounts average 18%. If your insurance costs $5,000, an 18% reduction qualifies for $900 in savings. Plus, bundling makes it convenient to deal with just one insurer. Here are some other tips they offer to save on home coverage.

Experts identify causes and cautions

Rainy Hake Austin, president of The Agency:

“Rates have steadily risen due to increased natural disasters, rising construction costs, and higher claim payouts. “In markets like Los Angeles and Aspen, home insurance rates are seeing premium spikes influenced by several factors unique to the area, including the risk of earthquakes, wildfires, and other natural disasters, as well as the cost of living and property values.” Since 2009, a 335% surge in buildings lost to California wildfires resulted in a 270% rise in associated costs. “In markets throughout Florida and Louisiana, home insurance costs rose due to destructive hurricanes. We are seeing insurance costs in high-risk locations, specifically in Florida and California, cost hundreds of thousands of dollars per year, and have seen it triple in price in many of these high-risk locations since 2020.”

Jennifer White, RE/MAX specialist in Florida:

“Insurance companies are requiring new shingle/asphalt roofs as early as 10–12 years into existing roof lifespans, or as early as 20–25 years for concrete or clay tile roofs.” She notes they are requiring inspections for water heaters, HVACs, ice makers, plumbing fixtures, and connections/pipings to verify that they are newer, in order to bind coverage. Aging may require replacement or coverage denial. Customers with previous claims may also be denied.”

David Harris, Coldwell Banker agent:

“In a state like Florida, other insurance challenges include the soaring prices of reinsurance, and the state’s litigation-friendly environment, which makes it easier for customers to sue their insurers, further increasing the insurance challenge.”

With so many complex factors, be sure you keep current on the amount of coverage you have and that you are paying a competitive price for the insurance. Shopping around for home insurance is good stewardship! Hopefully, you and your husband will get a nice surprise with a much lower quote for the cost to insure your home.

Do you want more tools and tips on financial stewardship? Are you interested in receiving ministry updates from around the world? Sign up to receive the Crown Newsletter emails by using the form on the homepage at Crown.org.