Rate hike, inflation contribute to rising cost of home insurance :: WRAL.com
Raleigh, N.C. — If you renewed your homeowner’s insurance in the last month, you likely noticed a much bigger increase than in years past. Home insurance is the latest budget item hit by price hikes.
WRAL’s 5 On Your Side dug into the factors driving the increase.
First, in June the Department of Insurance approved a rate increase averaging 7.9% in the state of North Carolina. The increase was negotiated down from 24.5%, which was what the NC Rate Bureau, which represents insurance agencies asked for. Insurance companies asked for the hike, citing extreme weather events as a major factor behind increased losses.
“We negotiated it down 16.6% lower than the Rate Bureau requested, and that’s going to save homeowners over $751 million in premium payments. It avoided a lengthy battle which could’ve cost consumers time and money,” explained Jason Tyson, the Director of Communications for the North Carolina Department of Insurance.
The earliest a rate increase can happen again is 2024.
The second factor driving rising premiums is inflation.
Turner Walston, an independent insurance agent with McClintock & Associates in Durham, says many of his clients are wondering if they need to change their coverage to keep up with the rising property values. He explained that home insurance covers the cost it takes to rebuild your home, so take the overall property value out of the equation for now.
“The land has value in of itself, the location has value in of itself, but we are covering the building,” he said. “If it burns to the ground, you are still going to have your land to rebuild on.”
The cost to build is skyrocketing, meaning if a homeowner needs to rebuild after a disaster, it will cost much more.
“The cost of materials is going up. The cost of labor is going up, supply chain issues, COVID has impacted things. People don’t know how much it costs to build a home, much less rebuild a home,” Walston said.
A typical policy increases 3% to 4% a year to account for inflated rebuilding cost, but the rate of inflation right now is more than double that, 8.6 percent overall, according to the latest CPI report. Walston explains that premiums are going up to account for the higher cost of a potential rebuild.
“I get emails saying, ‘Turner, my policy went up $300 tell me about this?’ and I say, ‘Well you’re coverage went up because we are trying to keep up with the cost to rebuild,'” he explains.
Walston’s clients Cathy Dorando, a real estate agent with Coldwell Banker HPW, The Abshire Team, and her wife bought a home in Durham in 2013. Nearly a decade and two kids later, Dorando says she wants to ensure her home is covered no matter what.
“It’s important. We got the kids; it is our asset. You just don’t want to end up in a situation where you can’t build back your house,” Dorando said.
Dorando recently upped her coverage to account for a costlier rebuild. Her policy is now an additional $170 a year.
“I think $30 per square foot is what we went up,” she said. “Everything is costing more, so it would be naive to think we buy back at the same price we bought.”
A year ago, Walston tells Five On Your Side that coverage at $150 a square was a safe bet, but says that’s bare bones at this point and your coverage should now be between $175 to $225 a square foot.
What should people to keep their premiums low? Shop around– see if you can get the same coverage at a lower price somewhere else. Bundle insurance– so putting your auto and home together, this can save you 5 to 15 percent. And consider increasing your deductible-you’ll have to pay more if something happens to your home, but your premium will be lower.
This content was originally published here.
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