Sky-high inflation is one of the main culprits behind the increase in premiums. Home insurance coverage is based on the cost to rebuild your home, and that may have gone up drastically as the price of many building materials has risen and supply chain issues have made the building process more expensive.
“Diesel fuel, copper, brass, lumber — all of these things have a bearing on what it costs to replace a home,” says Loretta Worters, spokesperson for the Insurance Information Institute. “Plus, you don’t have enough contractors. And if supply is lower, that means they’re charging more.”
The other big factor hiking your premiums: increasingly common natural disasters. Damage from tornados, hurricanes, storms, wildfires and other natural disasters so far amounts to more than $88 billion a year in the 2020s, according to the Insurance Information Institute. That’s a marked uptick from $52 billion in average annual losses in the 2010s and $37 billion in the 2000s.
If you own a home, especially in a natural disaster-prone area, what can you do? First, check to make sure you’re adequately covered. Your insurance payout should cover the rebuilding cost of your house, not its current market value.
“Your house could be worth $1 million, but it could cost much more to replace it,” says Worters.
Even if you think you’re properly insured, it’s worth checking in regularly, says Howard.
“Say your home is insured for $250,000. You renewed your policy three months ago and were assured this was the rebuild value,” he says. “But lumber increased 15% in those three months. Now your home costs $300,000 to rebuild, and if it’s destroyed, you’re going to be out $50,000 out-of-pocket.”
If, after talking with your insurance agent, you determine you’re adequately covered, start to explore ways you can lower your premium. Your current agent may be able to help on that front, says Howard.
“They’re likely to look at what discounts you’re eligible for, which will vary from state to state,” he says. “Maybe you have a home security system or a smart home or a water leak censor. One of those could be a 10% discount.”
Beyond that, shop around with different insurance carriers to see if a new firm would be willing to offer you a cheaper premium. “Now more than ever, we’re recommending reaching out and exploring all your options to see if you can get a lower rate,” says Howard.
This content was originally published here.