10 Reasons Your Homeowners Insurance is Going Up

There are obvious reasons you’re paying higher rates – like inflation and higher rates of natural disasters. However, these factors don’t tell the whole story.

Keep reading to discover 10 reasons why your homeowners insurance premiums may continue to rise in 2024 and beyond.

Homeowners Insurance Rose 11% Over the Last Year

It’s not your imagination: insurance rates are rising for homeowners across the country.

According to S&P Global Market Intelligence, insurance companies in the United States tried to raise premiums an average of 11% nationwide.

If you were paying $2,000 per year for homeowners insurance in 2023, then you could pay $2,200 or more for homeowners insurance in 2024 – and rates could continue rising in the future.

Some homeowners are paying $700 to $1,000 more per year for homeowners insurance. One North Carolina homeowner interviewed by NPR, for example, was shocked to find his premiums soaring to $1,600 per year – $700 more than he paid just two years ago.

Reason #1: Insurance Companies Are Playing Catchup After Two Years of Losses

Insurance companies have been paying out higher amounts in total claim settlements the last couple years – and they’re now playing catch up.

According to NPR, insurance companies paid $1.10 in claims and expenses for every $1 they collected in insurance premiums.

Insurance companies aren’t charities: they’re for-profit businesses. If the average insurance company is losing money, then things need to change.

Reason #2: Inflation

Many insurers blame their losses on inflation: many of the products and services they use are more expensive, and they push these higher costs onto policyholders.

The cost of repairing and replacing damaged homes, for example, is more expensive today than it was a few years ago. Material and labor prices have risen with inflation and recent shortages, pushing costs higher for insurers.

Reason #3: Increased Risk of Severe Storms

By September 2023, the United States had already experienced 23 severe storms that caused over $1 billion in damages – a record for that point of the year.

During the first half of 2022, property and casualty insurers experienced $6.6 billion in losses. During the same time period in 2023, insurers faced $24.5 billion in losses.

Many of these storms are underreported: we hear about major hurricanes and tornadoes, but we hear less about thunderstorms, windstorms, and hailstorms. Despite hearing less about these storms, they can be extremely costly to homeowners and insurers.

It’s not just hurricanes in the southeast or wildfires in the west; instead, some of the areas with the fastest-rising risks are in the middle of the country. Changing weather patterns are increasing the risk of hailstorms and windstorms, raising costs for insurers nationwide.

Reason #4: Insurers Have the Power to Increase Rates

Insurance companies are for-profit businesses. Like other for-profit businesses, insurers want to make as much money as possible.

Other companies have raised rates with inflation, seeking to draw as much profit from the market as possible. Insurers, where they have the power to do so, are taking a similar approach.

As NPR reports, “insurers have a lot of pricing power” because:

• State regulators can limit price hikes, preventing insurers from raising rates by a certain amount.
• However, insurance companies still have power in this system: if state regulators restrict premiums too much, insurers can choose to leave the state.
• As insurers leave, policyholders in states have fewer options and pay higher prices, worsening the insurance market overall. Policyholders in Florida, California, and other states, for example, have fewer insurance options as insurers leave. Insurance regulators don’t want insurers to leave the market, and they’ll work with insurers to keep them in the market.

Some call it “bullying.” Others call it a fair market. Insurers, however, may use whatever tactics they can to ensure they continue to be a profitable business.

Reason #5: Some Insurers Are Leaving High-Risk States

Insurers aren’t obligated to do business in a state – especially if they’re losing money by doing business in that state.

As risks become more severe in certain states, insurers are leaving. This leaves policyholders with fewer options, which tends to raise prices.

Allstate and State Farm recently stopped writing new policies in California, for example, while Farmers reduced the number of new policies it would write in the state. Safeco declined to renew 1,000+ policies in the Bay Area.

There’s a similar situation in Florida. As Policy Genius explains, as many as 10 Florida insurance companies have gone bankrupt since 2020. AAA, Farmers, Progressive, AIG, and Heritage have all stopped writing new policies or reduced business in the state.

Reason #6: Supply Chain Issues

Supply chain issues peaked in 2022, but they continue to affect some areas of homebuilding and insurance today.

Many common homebuilding materials are more expensive today than they were last year because of a combination of supply chain issues and inflation.

Reason #7: Higher Cost of Labor

There’s an ongoing labor shortage in the construction industry, pushing costs higher for insurers. It’s harder to find qualified contractors, homebuilders, and restoration crews than it was a few years ago.

As explained by Policy Genius, the United States had 274,000 construction job openings in March 2024 – nearly twice the number of job openings expected by the US Bureau of Labor Statistics.

Reason #8: You’ve Made One or More Recent Claims

You can’t blame inflation, supply chain issues, and natural disasters for all rising homeowners insurance costs; instead, it’s possible you’ve become riskier to insure.

Even a single homeowners insurance claim could raise rates 25% to 50%. The more severe the claim is, the higher your premiums might be. A major house fire or total loss, for example, could cause you to pay higher insurance premiums for five to seven years.

The more claims you make in a short period, the higher your premiums will go. If you’ve made three or more homeowners insurance claims within a five year period, for example, you might pay twice as much for homeowners insurance.

It is important to note that weather related claims can’t directly raise just your rates. Instead, insurance companies will raise the rates for everyone in that storm area, whether you filed a claim or not.

Reason #9: Your Home Became Riskier to Insure

Insurance is all about risk. If your home became riskier to insure, then your insurer could raise rates.

Some of the reasons your home became riskier to insure include:

• Your home got older, increasing the risk of severe damage from a hailstorm or windstorm
• You added a trampoline, pool, or other feature to your home, increasing risk
• You got a new dog, increasing the chance of making a liability claim
• You added a new building or feature to your home, increasing the cost of your dwelling coverage by adding value to your home

Reason #10: Your Credit Score Dropped

Insurers use your credit score to calculate rates. Homeowners with a good credit score pay lower rates, on average, then homeowners with a bad credit score. The difference can be significant.

If you recently missed a credit card payment or defaulted on a loan, then your insurer could raise rates or fail to renew your policy.

12% of Homeowners Have No Insurance

Roughly 1 in 8 homeowners in the United States do not have insurance.

If your home is paid off, then you aren’t obligated to carry homeowners insurance. It’s up to you to decide whether or not to carry homeowners insurance based on your personal aversion to risk.

As homeowners insurance premiums continue to rise, more homeowners may choose to forgo homeowners insurance. Some homeowners self-insure, paying “premiums” into a bank account and using that account to cover home repairs after a disaster.

As the cost of repairing and replacing a home rises, however, it’s becoming riskier to go without insurance. The median price of a home rose to around $426,000 in 2023. The average homeowner can’t afford to cover the cost of a new home out of pocket, making homeowners insurance increasingly important – even if it’s increasingly expensive.

Final Word: Compare Rates Today to Find Lower Homeowners Insurance Premiums

There’s never been a better time than the present to compare homeowners insurance premiums.

With rates rising, it may be time to switch providers. Some providers specialize in covering homeowners like you, while others are raising rates for homeowners like you.

For help with a homeowners insurance claim, contact ClaimsMate for a no-cost consultation.

Stephanie Corona

Stephanie is a property insurance claim expert with over 20 years of experience working as an insurance adjuster, expert witness, appraiser and umpire. She is passionate about sharing her expertise, knowledge, tips and training to help both property owners and Public Adjusters in their pursuit of effectively managing claims and recovering the claim settlement they deserve after a loss.