We continue to see home insurance rates rise year over year. Many clients ask me, [name], what causes this and is there anything we can do about it?
The answer isn’t that simple. Some factors driving prices up are out of anyone’s control (including mine). Then, you also have increases in costs for repairs or replacing any part of a home. All in all, it adds up.
Here are the top 3 reasons why it costs more to insure you home now than years ago:
- Uncontrollable factors
- Increasing occurrences of catastrophic weather (e.g., wind, hail, heavy snow, ice)
- Government regulation of insurance
- Insurance fraud (e.g., increases in claims paid out, legal fees)
- Rising home repair/replacement costs
- Inflation is on the rise driving up the cost of construction and home repairs along with replacement costs.
- According to the National Association of Home Builders, construction material costs (cement, drywall, lumber, nails, etc.) have skyrocketed in the past two years. The cost of construction materials has increased 2-5 times more than gasoline prices.
- Last year, lumber prices increased 27% and scrap metal prices (used to make nails and other construction supplies) increased 80%.
- Some homes that were built two years ago for $125 a square foot may now cost more than $200 per square foot to rebuild.
- Increased number of catastrophe losses
- According to the Insurance Research Council, the average claim payments per insured home have increased at an average annualized rate of 5% since 1997.
- One catastrophe modeling company predicts that catastrophe losses will double every decade or so due to growing residential and commercial density and more expensive buildings.
At VIP Insurance, we offer competitive rates and do what we can to control costs. If you’d like to learn more about the industry and what is driving costs or get a new quote on your home insurance, we’d be more than happy to help!