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Home > Blog > Why Does My Homeowners Insurance Go Up Each Year?
WEDNESDAY, JULY 17, 2019

Why Does My Homeowners Insurance Go Up Each Year?

Home insurance policies are always going to cost money. You have to pay your premium to receive the services offered by coverage. Your premium will vary based on numerous risks, and sometimes, you’ll notice that your policy’s premiums might change from year to year. Sometimes, you can’t controlimage of family playing in yard if your policy’s cost will rise. However, in other cases, you can. Here’s a little more information on keeping premium increases manageable.

Your Home Insurance Premium

A premium is the cost that you pay to maintain an insurance policy. So, when you buy a house, you’ll need to factor the cost of homeowners insurance into your budget. However, it’s sometimes hard to guess what your exact premium will be off the cuff.

To set your premiums, most insurers look at your risk profile. The risk profile is a set of data that your insurer will use to see how likely you are to file a claim on your policy. They will then compare your data to the data of other insurance customers, to determine if you are a higher or lower risk to insure. Those with higher insurance risks usually have to pay more for their coverage.

Some of the risk factors that might influence how much you will pay for your coverage are:

  • The cost and value of your property
  • The types of coverage you buy
  • How high you set your coverage limits
  • How high or low you set your damage deductibles
  • Your credit score
  • The home’s age
  • The home’s location
  • Crime, storm and other property damage risks in your area
  • The proximity of the home to fire houses or police stations
  • Your history of making claims on your insurance policies
  • Whether you have ever let any policies lapse due to non-payment

Depending on whether these statistics look good or bad to your insurer, the premium they have to charge you might go up or down.

So, for example, if you have made a lot of claims on your policy in the last couple of years, that means your insurer might have had to pay a lot on your behalf. Therefore, you are likely a higher cost risk to them. As a result, they might have to charge you more for your policy. The good news is, insurers often don’t track previous claims forever. After a few years, you might see your premiums drop again.

Each year, you will probably have to renew your homeowners policy. Most policies expire each year, and you can either re-enroll in the same policy for the next year, or you might decide to get a new policy, depending on your needs.

All the same, sometimes, you might see your premium increase for the new policy term, even on the same policy. Below are three of many reasons why you might see this change.

Economic Factors Influence Rates

Inflation is an economic trend that happens in most societies and economic markets. It impacts not only insurers, but also the real estate marketplace and the average homeowner. Therefore, insurers often have to nominally increase their policy rates to keep up with changes in the market’s cost inflations. Because costs might rise from year to year, so might your insurance premiums.

However, at times, the insurer can absorb the cost increase without raising premiums. Therefore, just because inflation happens, that doesn’t necessarily mean you’ll have to pay more for your coverage.

Risk Factors in Your Area Change

Most insurers periodically look at their risks pools to see where risks have risen in the last few years, and where they have decreased. If the risk factors that impact your homeowners insurance market have changed, then your premium might also.

Say, for example, that your neighborhood has seen a recent increase in property crime, like vandalism, home burglaries and related occurrences. Therefore, the risk your insurer has to take to cover your home might go up next year. Your insurer might have to make premium increases to cover this new risk. However, this increase might not only affect you, but also others in the areas. Therefore, the actual price increase might actually prove nominal.

You Made a Large Claim

One of the biggest ways to see a big premium spike is to make a lot of insurance claims on your policy. That’s because, when you make a claim, you essentially prove to the insurer that they have to take more of a risk to cover you. The more you claim the policy, the more the insurer might have to pay you, and the more they might have to charge you to absorb that cost risk. In a way, the pricing formula follows the rule of the more you use, the more you might have to buy.

If you notice a large increase in your insurance premium, don’t fret. Instead, contact your Remco Insurance agent. We’re happy to help you understand why increases have occurred, and if there are any steps you can take to decrease your premium to a more-affordable level.

Also Read: Protecting Your Family Before and After Flooding

Remco Insurance 800-282-2000

You can also find an office close to you at https://www.remco.com/locations.aspx.

Posted 4:59 PM

Tags: home insurance, rate increase
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