You likely spent a lot of time buying your home and making renovations. After paying a considerable amount for your homeowners insurance, you may have just realized your homeowners insurance rates have gone up again. What caused the rates to increase? Here are the main reasons why your rates may have gone up.
You Have Recently Filed a Claim
When buying homeowners insurance, you're safeguarding your home against major expenses should an unforeseen event occur. If the event insured against occurs and you suffer a loss and make a claim, your rates will go up.
Therefore, anytime you notice an increase in your rates, you should start by analyzing your claims history. Even the most minor claim can cause a higher rate. Non-catastrophic claims like theft and water damage will raise your rates more compared to claims from natural disasters.
Changes in Your Home
Every time you make an addition around your home, the value of your home increases. Therefore, changing your home, like adding a security system or renovations to make the home more energy-efficient, will increase your homeowners insurance rates.
After investing in your home, should anything happen, it will cost the insurance company more to replace the new items compared to replacing the initial items in the house—thus, the increase in rates. However, it doesn't mean the increase will happen yearly.
An Increase in Construction Costs
The cost of your insurance rates is highly influenced by the coverage amounts included in your policy, like how much it would cost to rebuild your home. The main indicator of how much it will cost to rebuild your home is the cost of construction materials and labor. So, when the cost of construction increases, it will cost more to rebuild your home—thus, an increase in the rates.
There are different reasons why construction costs go up. It can be due to forces of demand and supply, weather concerns, or legislation with a tariff increase in construction materials. Thus, construction costs can be the reason behind your increased rates.
A Decrease in Your Insurance Score
Your insurance score is a statistical measure of how likely you're to file claims after taking out a policy. To calculate your insurance score, the main factors considered are your claims history, your credit score, and the safety features around your home. If your insurance score goes down, your rates will go up.
Insurance service providers will assess your insurance score when applying for the insurance. They'll occasionally update your score when reapplying for your insurance. Thus, if during your renewal your insurance score has reduced, it could attract higher insurance rates.
If your homeowners insurance went up, it could be due to any of the reasons above. Luckily, there are some actions you can take to reduce your premiums.
Contact your home insurance provider for more information.
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