In recent years, U.S. homeowners have seen their home insurance premiums skyrocket. Between 2021 and 2024, the national average home insurance premium increased by 24%, more than double the rate of inflation over the same timeframe.1
Key Takeaways
- In recent years, the cost of homeowners insurance has increased significantly.
- There are several reasons for the rise in insurance premiums, including stricter underwriting requirements and increasing construction costs.
- There are steps you can take to help reduce your homeowners insurance premiums.
Factors Contributing to the Rise in Home Insurance Rates
Several key factors are driving the steady increase in home insurance rates across the country. Below are some of the main contributors homeowners should be aware of.
Inflation and increasing reconstruction costs
Over the past several years, the cost of building materials, labor and other homebuilding expenses has increased sharply, making it more expensive to rebuild following a natural disaster.
Underwriting losses for insurers
The recent rise in claims due to significant events has led to financial losses for many insurance companies, which now face challenges related to profitability and solvency. These losses have resulted in rate hikes by many insurers.
Insurance companies limiting coverage in certain areas
Some insurance companies no longer provide coverage for those living in areas at high risk for natural disasters. In some states with stricter insurance regulations, insurance companies are prohibited from using predictive modeling based on future climate projections and reinsurance costs. Without the ability to adjust rates to match potential future risks, many companies are simply deciding to eliminate their exposure to those states. For example, State Farm no longer issues new policies for residents of California due to the state’s high risk of wildfires.2
Stricter underwriting requirements
Insurance companies are becoming more strict about the types of risks they’ll cover, making it more difficult for homeowners to qualify — especially those who live in high-risk areas.
4 Actions to Help Lower Your Home Insurance Premium
Fortunately, the actions discussed below can potentially help you lower your home insurance premium.
#1 – Shop around – If you’ve been with your insurer for a while, it may be time to reevaluate your options. Consider reaching out to several reputable insurance companies to compare rates and coverage and make sure your policy remains competitive.
#2 – Bundle – Many insurers offer multi-policy discounts for those who bundle homeowners and auto insurance. Bundling your policies with a single provider can also make it easier and more convenient to manage your coverage.
#3 – Streamline – If it’s been a while since you reviewed your policies, you could save money by streamlining your coverage. Start by determining how much coverage you need. For example, consider how much it would cost in today’s dollars to rebuild your home. Doing so can help guide your homeowners policy amount. Then, look for ways to streamline your coverage. Maybe you no longer own a valuable possession that was still covered by your policy. Adjusting your coverage amount may potentially lead to savings. However, don’t be tempted to reduce or eliminate your coverage, as you could regret your decision if you ever need a payout — and protecting such a large asset is crucial.
#4 – Raise your deductible – One way to potentially save on premiums is by increasing your deductible. The key here is to make sure you have enough saved in your emergency fund to cover the higher deductible, should something unexpected happen.
