Homeowners insurance premiums likely doubled in 2023 due to a combination of high inflation driving up repair costs, severe weather-related disasters causing record insurance claims, and insurers raising rates to recover from financial losses. Increased costs for construction materials, labor shortages, and higher reinsurance rates contributed to the sharp spike.
Several factors are behind the rising rates. Severe weather events continue to cause serious damage and costly insurance claims. The rising cost of building materials, supply chain issues and unfilled jobs are driving up the costs of home repairs.
On average, homeowners saw a 12 percent jump in premiums in 2023, and then an additional 6.9 percent increase in the first half of 2024, according to the business analytics firm S&P Global Market Intelligence. Historically, homeowners insurance bills have risen only about 5 percent a year.
Raise your deductible.
If you can afford to pay more toward a loss that occurs, your premiums will be lower. Also, avoid making claims for losses of less than $1,000.
Full coverage isn't worth it when the annual cost of collision/comprehensive exceeds a significant portion (e.g., 10%) of your car's low market value, you have enough savings to replace or repair it out-of-pocket, or if you have a clear title and don't need it for work/family, while it's still required for leased/financed cars. Key factors include your car's depreciated value, your emergency fund, and your risk tolerance for paying for repairs/replacement yourself.
The 80% rule in homeowners insurance requires you to insure your home for at least 80% of its total replacement cost to receive full coverage for partial losses, preventing underinsurance and significant out-of-pocket costs if damaged; if you fall below this threshold, your insurer pays a proportionate amount of the claim, not the full repair cost. This rule ensures you can rebuild, factoring in current material and labor costs, but excludes land value.
Record Numbers of Homeowners Are Losing or Dropping Insurance—and Facing Legal Trouble. Few people enjoy paying for homeowners insurance, but most understand the financial devastation that can result from going without it.
Holden Lewis, a mortgage expert with NerdWallet said the increase in insurance premiums is attributed to a rise in natural disasters, which has led to higher claims and repair costs. Insurance companies are passing these costs on to consumers, including those in our area.
The "50% Rule" in insurance primarily refers to a Federal Emergency Management Agency (FEMA) regulation for flood-prone areas, stating that if repairs or improvements to a damaged structure exceed 50% of its pre-damaged market value, the entire building must be brought into full compliance with current flood elevation and construction codes. This rule, also known as the Substantial Damage/Improvement (SD/SD) rule, prevents properties from remaining in high-risk zones without mitigation, potentially affecting flood insurance eligibility if not followed.
If your annual collision premium costs more than 10% of what your vehicle is actually worth, you're probably at the point where dropping this coverage makes financial sense.
The 80/20 rule in insurance refers to two main concepts: the Medical Loss Ratio (MLR) under the Affordable Care Act (ACA), requiring insurers to spend 80% (85% for large groups) of premiums on care or refund the rest, and a common home insurance clause where you must insure your home for at least 80% of its replacement cost to receive full coverage for partial losses, preventing underinsurance. In health insurance, it limits administrative costs and profits, while in homeowners insurance, it ensures adequate dwelling coverage to avoid penalties on claims.
U.S. homeowners now pay nearly $3,000 each year for coverage. The average annual cost to insure a home in the U.S. is now $2,802 despite significant variation across different regions, according to a report by TheZebra.com.
However, some carriers will use your age to help determine the premium on homeowner's coverage. Typically it is not a big change in the rates, and oftentimes, it's to evaluate a potential discount as a senior citizen, which could be a benefit in keeping your husband as the primary insured.
What they won't tell you is that their primary job is to save their company money—often at your expense. Insurance adjusters are not your advocates. They're trained professionals whose performance is measured by how much they save their company. Every dollar you don't receive is a dollar their employer keeps.