Homeowners Insurance Costs Keep Rising. Here’s What Experts Say You Can Do

For homeowners across the US, their latest insurance renewal notice has come with some sticker shock. Even homeowners who have never filed a claim are seeing premiums climb significantly. In some parts of the country, insurance costs have risen so rapidly that they are becoming a major factor in housing affordability, joining mortgage rates, property taxes, and maintenance expenses as a growing financial burden. Some of the latest data indicates that homeowners insurance costs have spiked since the pandemic. For what it’s worth, insurance companies claim that weather-related events, rising construction costs, and higher claim payouts have all contributed to the increase.

While homeowners certainly need to be more proactive than they were in the past, some industry experts believe that there are still some steps that homeowners can take toward reducing insurance costs.

Why Homeowners Insurance Keeps Getting More Expensive

The cost of building and repairing homes is the biggest driver behind rising homeowners insurance rates. Construction materials, labor expenses, and replacement costs have all increased significantly in recent years. When insurers estimate what it would cost to rebuild a home after a covered loss, those higher costs translate directly into higher premiums.

Severe weather also plays a major role in home insurance premiums. Wildfires, hurricanes, tornadoes, hailstorms, and flooding have caused billions of dollars in damage. As those claims continue to become more expensive and more frequent, those rising costs get passed on to the policyholders. Even policyholders who haven’t made claims for weather-related events are seeing an uptick in their home insurance premiums, resulting in rising costs and frustrated customers.

Shopping Around May Be the Most Effective Strategy

Industry professionals say that one of the most effective ways to combat soaring rates is to regularly shop around for better prices. Many homeowners allow policies to renew automatically year after year. However, insurers frequently adjust their pricing models, which means a company that offered the best rate three years ago may no longer be the most competitive option today.

Melanie Munson, who works as an insurance and finance expert at Clearsurance, said, “Shopping around is the best way to save money, especially if it's been a while since you compared quotes."

While industry experts have highlighted the importance of comparing quotes for years, it appears to be becoming a more popular approach. Recent data show that policy switching among homeowners has reached record levels as consumers search for better rates.

Raising Your Deductible Can Lower Premiums

A deductible is the amount that a homeowner must pay out of pocket before insurance coverage kicks in. Unfortunately, some homeowners are not aware that they can adjust their deductible, and that doing so may lower their premiums.

According to analysis provided by NerdWallet, increasing a deductible from $1,000 to $2,500 can reduce annual premiums by roughly 9% on average. However, experts caution that this strategy only works if homeowners have sufficient savings available to cover the larger deductible after a loss.

The goal is to find a balance between raising your deductible and being able to pay more in the event of damage to your home. For homeowners with strong emergency funds, though, the tradeoff can be worthwhile.

Home Improvements Can Produce Insurance Savings

Some upgrades not only improve a home's safety but can also reduce insurance costs. Insurers often offer discounts for improvements that lower risk, such as updated electrical systems, new plumbing, impact-resistant roofing materials, security systems, smoke detectors, and storm-resistant features.

Roof condition has become especially important in recent years, as climate changes have resulted in more severe storms. Certain states are also exploring large-scale mitigation efforts designed to lower insurance costs. In Colorado, for example, officials have proposed wildfire-hardening programs and other initiatives aimed at reducing homeowner risk and ultimately lowering premiums.

Avoid Filing Small Claims When Possible

Finally, experts agree that avoiding small claims can help with insurance affordability. Insurance experts interviewed by TheStreet noted that homeowners should view insurance primarily as protection against major losses rather than a tool for handling every minor repair.

While something like a broken window caused by a storm may be covered by your insurance, it may be cheaper to cover the cost yourself. Evaluate the cost of paying for repairs compared to potential increases in monthly insurance premiums.

Why Experts Say Homeowners Need to Stay Proactive

Being proactive is key. Peter Piotrowski, chief claims officer at Hippo Insurance, told Realtor.com that homeowners should look beyond price alone when evaluating policies and understand exactly what deductibles, limits, and exclusions they are purchasing. While rates are expected to keep rising, there are steps you can take to protect yourself.

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