You get your home insurance policy renewal papers and notice that the rates went up. Again! And you didn’t even file any claims! This can be very frustrating, but the truth is that rate increases are very common in the insurance industry. There are numerous reasons why your insurance rates have gone up. From our experience as Maryland homeowners’ insurance agents, here are some of the most common ones.
Inflation is a concept most adults are well familiar with: money loses its value. What $100 bought you 5 years ago is more than what $100 can buy you today. So, translating it into insurance terms, your covered losses now cost more to cover, so you may need to pay more in premiums. Inflation adjustments are expected and are typically not significant.
Additions like pools, garages, decks, patios and home additions will most certainly trigger an increase in your insurance rates. But at least this increase is predictable. In most cases you have to report your renovation to the insurance company before they can adjust your coverage. Adding structures onto your home not only increases your home’s value, but may also open you up to new liabilities, such as slip and fall accidents by the pool. If you are concerned about the hike in your insurance premiums, talk to your Maryland insurance agent before building your addition.
Cost of Replacement
There are different types of coverage your homeowners’ insurance policy may offer. One such type is “replacement cost coverage.” It means that in case of a total loss, your insurance company will pay the actual amount it costs to build your new house. It is a nice coverage to have, because the cost of rebuilding your home could be higher than its current market value or the capped amount your policy is offering. However, with the replacement cost coverage may come rate increases, because the cost of building materials and labor fluctuate. For example, if there is a regional or national deficit of lumber, lumber prices hike and your homeowners’ insurance rates go up.
Insurance is deeply rooted in risk assessment. And while your home doesn’t really change or move into a riskier environment, the risk factors around it may change. For example, maybe the weather changed in your area, and now it’s more prone to severe storms and flooding. Or maybe you used to be in the suburbs, but as the city expended and swallowed your town, the crime rates went up.
Some insurance companies take your credit score into account when calculating your rates. The assumption is that people with higher scores are more financially responsible and, therefore, are in a low risk category. So if you recently failed to make on-time payments or maxed out your credit cards, your credit score may have taken a dip and your insurance company hiked up your rates.
While your age may not play as big of a role, the age of your home does. As your home gets older, it may become more prone to damage. For example, wind is more likely to rip off old siding or shingles, and fire may spread faster and do more damage to an older structure. It is possible to avoid some of these rate increases by doing timely repairs, such as replacing your roof, plumbing, electrical or siding. You might pay a lot upfront, but you will get long-term savings both in insurance rates and energy efficiency.
Your homeowners’ insurance probably provides liability coverage for dog bites that happen on your property. If you happen to get a new dog that your insurance company considers an “aggressive breed,” your rates may go up. Similarly, if you purchase any wild animals permitted in your state to be kept as pets, this may lead to the rate hike as well.
What Can I Do?
If your insurance premiums are getting uncomfortably high, you have three options: shop around for a new insurance company with better rates, increase your deductible to lower premiums, or ask about credits and discounts you may not be using yet. No matter what you decide, be sure to talk to your Maryland home insurance agent first. Our insurance experts here at Freedom Insurance can help you review your policy, determine the reason for rate increases and come up with the right strategy to combat the rate hikes!
Give us a call or contact online today!