Homeowner's insurance typically renews every 12 months with generally a slight premium increase. This year, however, you may experience an increase more significant than in the past. Why and what can you do about it? Find out from the experienced insurance agents of HPM Insurance.
Why Did My Homeowners Insurance Premium Increase at Renewal?
Generally speaking, the pricing of homeowner's insurance is driven by several factors. Some are location-specific, like where the home is located, coverage amount, the property's claims history, and safety/security protocols in place. Other rating factors are more person-specific such as credit score and claims history.
But what if you have lived in and insured your home for years, have not filed a claim within the last year, and still see a premium increase? Why?
Rising Material Costs
Multiple factors are causing building material costs to rise. First, lumber prices have risen quickly -- and given the amount of wood necessary for home repair/construction, this increased expense is significant.
Second, existing home prices have risen significantly over the last few years, creating more demand for new home construction and existing home renovations. This, in turn, increases the demand for all building materials, which is challenging to meet with supply chain issues.
Rising material costs directly impact how expensive homes and personal property are to repair or rebuild. In addition, many home insurance policies include replacement coverage, which means insurers are paying in claims and inevitably passing those expenses down to policyholders.
Current Labor Shortage
The current labor shortage also makes homes more expensive to repair and rebuild, thus driving up home insurance premiums.
Labor issues plague almost every industry, but they have an especially significant impact on homebuilding. Carpenters, roofers, electricians, plumbers, and masons are all skilled tradespeople in demand. As a result, they can command higher wages for their work.
Extreme Weather Events
Although not typical for New Hampshire, severe weather events such as hurricanes, tornadoes, and wildfires are increasing in frequency and severity across the country impacting national insurance carriers. Even if you have a regional insurance company that only insures homes within New England, they purchase re-insurance (insurance for the insurance company in case of a catastrophic loss). Re-insurance is a global business and not shielded from the impacts of worldwide issues like severe weather, economic downturns, and wars.
As extreme weather events become more and more severe, insurance companies must anticipate the increased property damage that’s likely to follow. More significant damage equals greater losses, meaning insurers have to charge higher premiums.
The United States sustained 20 extreme weather events, with losses exceeding $1 billion during 2021. Insurers generally spread the high and growing costs across their policyholders.
Top 3 Tips to Save Money on NH Homeowner's Insurance
Despite the rising costs of homeowners insurance, resist the temptation to cancel coverage. Rising rates aren’t a reason to take risks you can’t cover. Plus, forgoing coverage will increase rates when you repurchase insurance.
Instead, review strategies that help keep homeowner's premiums affordable without significantly sacrificing coverage:
#1: Bundle your Insurance: Bundling insurance is a great way to save money without sacrificing coverage. Bundling means one insurance company writes the insurance for at least your home and auto insurance. (Some carriers extend these discounts to umbrellas, motorcycles, snowmobiles, and RVs as well.) Such credits can be upwards of 20%, so definitely worth asking your agent about it.
#2: Increase your Deductible: Increasing your deductible transfers more risk to you, but the transferred risk is defined. You’re accepting a few more hundred or thousand dollars of risk if there’s a covered loss. In return, you might get a substantial premium reduction.
#3: Talk to your Insurance Agent: Just because most insurance companies are generally raising homeowners' rates doesn’t mean that they’re all raising premiums the same amount. An independent agent, such as HPM Insurance, has access to more than a dozen insurance companies and can tell you rather quickly if your premium seems reasonable.
If you have been with the same carrier for many years, it may be time to have your agent look at other markets for you. The insurance company that was a fit for you years ago may have experienced more claims company-wide and is forced to raise rates more drastically.
You and your agent can decide if switching carriers is worth it, as you need to consider the loss of renewal credits and the possibility of a home inspection which can open a can of worms.
To speak with an insurance agent about your situation, contact us at HPM Insurance. We understand the current insurance landscape and are here to help you navigate it. In addition, our independent agents can discuss different premium-mitigation strategies that don't unwisely reduce protection.