When your homeowners insurance policy comes up for renewal in 2024, be prepared for an unpleasant shock: You’re likely to face a premium increase of 15% to 20%, and the price jump could be much higher if you live in an area where there’s risk of wildfires or severe storms. That’s assuming you can find home insurance coverage at all.
Home insurance costs have soared recently, and policy renewal data shows that premiums have been increasing by more than 20% year-over-year, according to separate reports from insurance firm Matic and insurance marketplace Policygenius released in late 2023.
Why is home insurance so expensive?
The high number claims in the last few years, which far exceeded what actuaries predicted, is the primary reason why home insurance is getting so expensive. Last year, 28 individual weather and climate events resulted in at least $1 billion of damages, up from a previous high of 22 in 2020, according to government data.
Beyond disaster risk, much of the increase can be attributed to supply-chain issues and labor shortages driving up the cost of home repairs and replacement. Also several other issues that insurers are facing, including fraud, excessive claims and legal system abuse.
Inflation has eased in many areas of the economy, and as prices for home repairs and the costs of replacing home products stabilize, insurance prices typically increase with inflation on a lagged timeline. Insurers must go through state regulators before they can increase premiums, and those processes take months. Even once a rate increase is approved, it can take as long as a year for the new rate to kick in because policy renewal happens every 12 months.
Home insurance availability is more limited
Not only are home insurance policies much more expensive now than they were a few years ago, they’re also getting harder for customers to find. In California, where wildfire concerns have snowballed since 2017, some insurers have discontinued their home insurance businesses last year or limited where they would write insurance. Some of the companies that stopped writing new policies are now getting huge rate increases. For example, after halting new business in 2023, California’s largest insurer, State Farm, recently obtained approval for a 20% premium increase for renewals that will be effective in March. Allstate, which also has a pause on new homeowners policies, requested a 39.6% rate increase, which the California Department of Insurance says is still under review.
While there’s no question that an increase in serious weather events has coincided with rising inflation is causing insurance rates to increase. There are ways to help ease the rising rates. Talk to your insurance professional to see what changes could be made to your policy.
Some of the information in this article was obtained from Money magazine.