If you recently opened your insurance statement and found the cost of your homeowners insurance has increased you may be wondering why. There are a variety of factors that can push up your premium. We thought it might be helpful to look at the most common reasons your premium is on the rise:
Your Home is Getting Older
As our home gets older, there is a good chance that your homeowner rates will be headed up. The reasoning behind the increase is that an older home is more vulnerable to damage, which could result in a claim.
A roof has a certain lifespan and as your roof gets closer to its expiration date your premiums will likely go up. Roofs are expensive to replace and according to data from the Insurance Institute for Business & Home Safety, damaged roofs occur in roughly 95 percent of all wind-related property losses every year.
An old roof is more likely to fail or be damaged during a major storm and insurers take that into account when setting premiums.
The roof is not the only issue your aging house will have, electrical, plumbing and HVAC systems are more likely to fail and cause a water leak or fire as they age. This increased risk will be factored into your premium.
Risks in Your Area
While your home has stayed in the same location things around it may have changed. Flood maps change as do weather patterns and if you area has seen an increase in flooding or severe weather your premium may be headed up.
This is also true of crime rates. If your neighborhood has fallen on hard times and crime is on the increase, you may see higher homeowner rates.
Local building costs will also push up premiums. If there is a building boom in your local market and local building costs are headed up it increases the cost to rebuild your home if it is destroyed, leading to more expensive insurance.
Your Credit Score is Down
These days insurers give quite a bit of weight to your credit score. This is because statistics show that people with low credit scores tend to file more claims. If your credit score has taken a hit in the last few years there is a very good chance that your premium will be headed up.
Do what you can to maintain your credit score or if it has dropped make a concerted effort to bring it back up. Pay bills on time, limit debt and pay off your credit card every month if possible.
Your Home Got Bigger
If you recently upgraded your home or put on an addition, you rates will go up to reflect the increased cost of rebuilding it. Adding square footage or updating your kitchen or bathrooms will push up your premium but it is absolutely necessary to notify your insurer if you update your home.
If you fail to notify them you may find yourself having issues when it comes time to file a claim. They may deny the claim or at least the portion of the claim that involves your upgraded home or addition.
Risk Factors Change
If you put in a swimming pool, trampoline or tree house you can expect your rates to increase. These types of additions push up your risk factors dramatically and increase your odds of filing a claim, so your insurer will want to collect a bigger premium to account for the increased risk.
While it may be tempting to leave your insurer in the dark about your new risk factors, it can be a mistake. If you insurer is unaware of your pool or trampoline they may deny a claim if someone is injured leaving you on the hook for medical bills and a possible lawsuit.
A New Four Legged Family Member
If you added a pet to your family, you may see an increase in your premium, especially for certain dog breeds. Statistics show that roughly one-third of all liability claims on homeowner policies involved dog bites.
Many insurers will raise your rates if you have a certain type of dog. Breeds such as pit bulls and rottweilers will absolutely affect your premium, as will exotic pets such as snakes and monkeys. In some cases, insurers will cancel your policy or not offer coverage for certain dog breeds. Always check with your insurer before bringing a four-legged friend into the house.
If you add a barn or major workshop to your property your rates will be headed up. Homeowners insurance not only covers your main home but any outbuildings you have on your property. Because your insurer will have to cover the cost to replace or repair your new outbuilding, your rates have to go up.
Starting a Home Business
If you make the move to self-employment and work out of your home your premium may go up. There are a couple of reasons this is possible. A home business often requires a fair amount of expensive electronics (think computers, printers and other office supplies) which will all have to be replaced if disaster strikes. The second reason is increased liability. If you have clients coming to your home on a regular basis it increases the risk of someone slipping or falling, resulting in a claim.
High Value Property
A diamond ring, expensive watch or a new painting on the wall may increase your rates. High value property will usually come with a cap, requiring you to purchase a rider to fully protect your property.
While the cap varies by insurance company, $1,500 is a common limit. If you have a large amount of high value items a rider will be required, raising your rates.
What You Can Do About Increases
If your premium has headed up there are a few things you can do to bring your rates back down.
Shop Your Coverage: This is often the best way to lower your premium. Insurers rate risk differently so premium quotes can vary dramatically. Shop your insurance at least once a year and make sure you are comparing apples to apples when it comes to deductibles and coverage levels.
Discounts: Insurers offer a variety of discounts so make sure you are getting all of the discounts that you are entitled to receive. Ask your agent to make sure you are receiving all discounts available.
Raise Your Deductible: If you can afford it, double your deductible. The higher your deducible, the lower your premium. This will absolutely lower your rates but make sure you can easily afford your deducible in the event you have to make a claim.
Security: Adding a monitored security system, storm shutters or even an in house sprinkler system will all result in major discounts. Check with your insurer about home upgrades that will lower your premium.