Most people don’t evaluate their home insurance renewal like they do their auto insurance. The results are higher annual rates.
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It is not uncommon for people to have their current home insurance policy because it was set up by their mortgage lender when they bought their home.
As a result, most people are unaware of their coverages, and even their rates. It isn’t until they see an increase in their mortgage payment that they begin to question “What is going on here!?!” They scramble to find the customer service phone number to their bank and find out why their payment has increased.
After speaking to their bank, they are informed that there was a shortage in their escrow because the home insurance went up and it resulted in their mortgage payment going up.
Now, the customer is really upset. After spending the better part of 30 minutes on hold, they are told it wasn’t even their fault, it was the insurance company. They proceed to call their agent office and chew them out. “Why does my home insurance keep going up?”
Why does my home insurance keep going up?
1) The cost to rebuild your home increase over time
If you look at your home insurance policy, you’ll notice a coverage at the top that is called “Dwelling Coverage”. This is the amount of money that the insurance company has determined it will take to rebuild your home.
One constant reason for increasing premiums is because the cost to rebuild your home goes up every year. With the cost of materials and labor increasing, it will require more dwelling coverage. As a result of increasing coverages, it affects the bottom line premium.
One thing to consider is that the older homes cost more to rebuild than newer homes. In northern California, we have a number of communities with older homes. These homes were built 60, 70, or even 100 years ago. The cost to rebuild these houses in the event of a major loss is more than the homes in newer communities where the home is less than 15 years old.
2) California insurance companies are increasing their home insurance rates
In 2018, every carrier is increasing their rates on auto and home insurance. The reasons behind this according to them is that they are all experiencing major losses throughout California from the last two years of fires and need to make up ground and refill the pot of money that claims get paid out of. As a result of their multimillion-dollar losses, everyone feels the brunt of their decisions.
“But Nick, I have never filed a home insurance claim, why do the companies penalize me?”
As a consumer who has a clean driving record and has never filed a home insurance claim, I am empathetic towards this logic. The way insurance works is you have to imagine a giant pot of money. Everyone pays money into this pot every month and every year. That money is used to pay out claims for everyone. If you ever did have a claim, it allows the insurance companies to write a check for $1000 all the way to $5 million. Essentially, your premiums pay for everyone else, and everyone else pays for you.
After the last few years in California, the companies have all taken massive losses. This is a result of big things like the recent wildfires, all the way to the severity and volume of auto accidents. We even wrote a blog about that topic here.
How Can I Reduce The Costs Of My Home Insurance?
1) Check Your Deductible
The average deductible for home insurance is $1000. Going back to the very first paragraph in this article, we mentioned that most people have their home insurance as a result of the lender they worked with setting it up for them. Most policies have this $1000 deductible because it’s just the “norm” on home insurance.
When we speak to clients, we find out that many of them wouldn’t even file a claim on their home insurance for damages under $2000. They typically tell us that they would take care of the issue themselves or hire a contractor to repair or fix damages.
So that begs the question, “why have a $1000 deductible if it is never even going to get used?” Most people would agree that they would only file a home insurance claim if there was a major loss. As a result, we find that more and more homeowners are electing to have a higher deductible to save on their premiums.
The average difference in raising your deductible from $1000 to $2500 can be as high as 20% of the premium. With the likelihood of a claim being filed, these saving add up every year.
2) Bundle Your Auto Insurance With Your Home Insurance
This is self-explanatory. The more you “package” your insurance, the more discounts you receive. There are only a few instances where it makes sense to split up your policies with different insurance carriers. The majority of the time it can help you save an extra 20-30% on both your home and auto insurance.
3) Evaluate Your Insurance Every Year With Your Agent
Because California insurance rates are volatile and change every year, it’s a good idea to connect with your insurance agent and go over options to see if a different carrier is a better fit. If your insurance agent only offers one product or a few variations of the same product, or if you did everything online and don’t have an agent, then it’s a better idea to consult with an independent agent who can look at the overall insurance marketplace for you. Luckily for you, we know just the right agency.
How I Got $389.21 Back
Because I elect to get my insurance through an independent agency, I am able to have my rates evaluated every year. When it came time to renew my home insurance, I elected to go with a different carrier that was a great fit for me and my needs. I also determined that I could raise my deductible to $2500 and as a result, it helped me lower my premiums.
When it came time for my bank to pay for the insurance, I had a surplus. When there is a surplus, the bank will send me a check. This is how I was able to get back $389.21
If you have caught yourself asking the question “Why does my home insurance keep going up?” Then fill out the form on this page and talk with one of our independent agents. We can tailor a policy that meets your needs from a coverage aspect and also a budget aspect.
I80 Insurance works with only top-rated home insurance companies. Our motto isn’t to simply find you the cheapest company but to prescribe solutions to your areas of concern.
We are able to meet with you in person if you’re local or utilize a wide array of technology such as video, text, and email if you’re not able to meet locally.
If you were interested in learning more about Nick’s research on passing gas, you may read the article here It was found online, so you know it’s true.
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