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Why Did My Home Insurance Rate Increase?

Home insurance form on a table with dollar bills and a calculator - a concept of home insurance rate.
Table of Contents

Maintaining adequate home insurance is an important part of home ownership. This means assessing any changes and discussing them with your insurance agent before your annual renewal. If you haven’t made changes to your home or filed claims in the past year, renewal is often uneventful and results in minimal increases. However, in the past year, home insurance premiums have risen an average of 12.1% in the U.S., resulting in an average annual increase of $134. You’re not alone if you’re wondering why your home insurance rate went up. The truth is a combination of factors caused an increase for practically all homeowners.

These are the biggest reasons for home insurance rate increases across the country.

Record High Inflation

If you drive and eat, you’ve likely noticed the increased prices of gas and groceries. With inflation rates up 8.3%, the costs of everything are surging. Wondering why inflation should affect your home insurance rate? Due to inflation, shipping issues, as well as other challenges in recent years, the cost of building materials has increased significantly. Statistics from 2021 show that material goods for new residential construction are up 18.6%. Lumber and wood products are up 6.2%. Asphalt roofing materials are up 16.3%. These increases add up quickly.

Consider the impact of a 15% increase in the cost of building materials on the rebuilding of a $250,000 home. If your home was valued at $250,000 and building materials increase by 15%, it will cost $300,000 to rebuild. If you don’t increase your coverage to match these rising prices, you’d be paying $50,000 out of pocket in the event of a disaster.

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Increase in Extreme Weather Events

Hurricanes, floods, droughts, wildfires, as well as other severe weather events increase the risks involved with insuring your home. In recent years, extreme weather events have increased in frequency and ferocity, resulting in increased damage and costs for repairs. According to the National Centers for Environmental Information, the U.S. has sustained 341 weather and climate disasters since 1980, where overall costs of damages reached or exceeded $1 billion. In 2022, there were 18 events with losses exceeding $1 billion. To put the change into context, the 1980-2022 annual average is 7.9 events, while the annual average for the last five years is 17.8 events.

Insurance companies determine a home insurance rate based on the risks of potential losses. As weather-related damages go up, the cost of insurance overall rises with these costs.

Construction Labor Shortages

New home builds, renovations, and commercial builds are increasing. Unfortunately, hires in the construction industry aren’t keeping up with demand. In April 2022, the U.S. construction industry had 440,000 job openings — the highest levels recorded since industry-level jobs data were first collected. The labor shortage creates a delay in building projects and drives up construction costs even further. These increased costs are also reflected in the rising costs of rebuilding homes and, as a result, increasing home insurance rates.

Personal Changes Affecting Your Insurance

Any changes you make to your home or the property surrounding it can increase or decrease your property value. Different additions can also have varied effects on your insurance rates. Home renovations have increased in recent years. Added rooms and improved features usually increase a home’s value. This also means an increase in the cost to rebuild in the event of a covered event.

On the other hand, some changes can increase your insurance rates because they add increased risk. Insurance companies consider swimming pools, trampolines, and even house pets as “attractive nuisances”. These features increase the appeal of your property (often to children) while increasing the risk of danger. While it’s inconvenient for home changes to raise your insurance rates, it’s important to report them so you can avoid gaps in coverage.

Man computing his home insurance rate while holding a miniature house model.

How to Navigate a Changing Home Insurance Rate

The reasons for a rising home insurance rate are often out of homeowners’ control. Still, it’s important to pay attention to these changes and the way your coverage is affected. Rising costs of building materials and construction rates increase the cost of rebuilding your home in the event of a disaster. If your coverage doesn’t match these rising costs, you’ll be forced to pay out of pocket.

So, how can you maintain the home insurance coverage you need and keep your home insurance rate affordable? There are actually several options for lowering home insurance rates.

Shop around to compare prices.

While certain factors mean average home insurance rates are on the rise, some insurance companies have less overhead and lower rates than others. Shop around to see if you can get the same coverage for a lower price from a different agency.

Work with an independent insurance agent.

Independent insurance agencies provide customers with insurance options from a variety of different insurance companies. You can compare rates across companies without taking the time to shop around. Independent insurance agents can also work with you to help you find individualized coverage that meets your unique needs without paying for add-ons that aren’t relevant to your lifestyle.

Ask about discounts.

Insurance companies offer a variety of discounts that range from multi-policy discounts and E-document discounts to nonsmoker discounts or superior home construction discounts.

Improve your home’s safety.

Having home safety features like a smoke detector, a home sprinkler system, a burglar alarm, or deadbolt locks on your door can lead to a lower home insurance rate.

Review your insurance coverage. 

Talk to your independent insurance provider each year and when you make changes to your home to ensure your coverage is accurate. Make sure all home improvements are also accounted for, and cancel the coverage you no longer need.

Increase your deductible.

If your insurance premiums are too costly, increasing your deductible can lower them. Just remember that it’s essential to set a deductible amount you’re prepared to pay in the event of a disaster.

Invest in valuable upgrades. 

Features like storm shutters and impact-resistant roofing make your home more resistant to damage. As a result, such improvements could lower the cost of insuring your home.

Increasing insurance premiums is frustrating, but gaps in coverage can be even more expensive in the long run. If you’re having difficulties with your Massachusetts home insurance premiums during changing economic times, our independent insurance agents can help. Contact LoPriore Insurance to learn more about the benefits of home insurance with an independent insurance agency.

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