12 Reasons Your Home Insurance Rates Are Going Up
So your home insurance rates went up unexpectedly and you just can’t figure out why. You haven’t filed any claims so what could be the reason for the spike in your home insurance premiums?
Unfortunately, most homeowners do not realize that insurance companies do not solely increase your rates based on the number of claims you have filed in the past, but instead many factors can lead to an eventual increase in insurance rates.
1. Bad Weather
We don’t need to tell you this as a New Englander, but here it is… Connecticut is prone to floods, hurricanes, thunderstorms, and as we all know snowstorms. Even though the state has not been affected by a natural disaster for a while, the state has declared a natural disaster emergency 19 times.
There has been one earthquake, eleven hurricanes, and six tornadoes in Connecticut over the years. With global warming negatively affecting the climate, the United States has seen several natural disasters recently.
If Connecticut suffers from another natural disaster, you can expect your home insurance premiums to increase. Natural disasters cause serious damages to homes and businesses, leading to huge insurance payouts, and depending on the level of the disaster, the payout can be as high as $3 billion.
To combat the worsening weather conditions, insurance companies redistribute some of these expenses among their clients as well as by modifying or adjusting the weather-related insurance coverage. Therefore, you need to review your insurance policies to determine the degree of weather-related coverage they offer and what they do and don’t cover in terms of weather.
2. BIG, BIG Homes
With homes getting bigger, insurance companies have started to measure the cost of rebuilding your home and replacing it to calculate how much insurance coverage homeowners should qualify for. If you own a large home, somewhere around 1,900 to 2,300 square feet, you can expect an increase in your insurance premiums.
Bigger your home, the higher your insurance rates will be. If you’re installing or replacing your home’s fixtures with high-end fittings such as granite countertops, your insurance company will increase your home insurance rates, as replacing those in the event of damage can be quite expensive.
3. Own Several Furnishings
If you reside in a bigger home, you require more furnishings to fill square feet of the home. You might have media equipment, fully completed and furnished basements, wine cellars, and several TVs, laptops, computers, handheld devices, and state-of-the-art appliances.
If any of this is true for you and your insurance company has just increased your home insurance rates, now, you know the reason. For the insurance company, replacing all these items will come at a hefty price, which is why they increase your insurance premiums.
4. Finished Basement
Homes with completed and fully furnished basements are no longer used to store items such as laundry but are remodeled and decorated as entire living spaces, theatre room, bedroom, game room, and more. A completed basement increases the value of your home.
Together, the completed basement and its items increase your insurance premiums. For instance, water damage can ruin your media and entertainment rooms, living spaces, costly flooring, and other high-tech and expensive to replace items.
If you have a completed basement, you should install sump pumps and take other measures to minimize the risk of damage. If you have not finished your basement yet, but have plans to, you should address all the issues regarding the buildup of moisture.
On top of that issue is the question of flooding. Very few homeowners policies cover flooding, although some will take care of damage that resulted from a broken pipe but not other types of flooding. You may need to buy or beef up your flood insurance policy to make certain your finished basement is completely covered.
5. Aging Infrastructure
Aging and old infrastructure increases the risk of basement flooding and sewage buildup. They will increase your home insurance rates if your home is old and has been around for several years. You should know that your homeowners insurance coverage may not cover sewage buildup.
If you want your insurance company to provide coverage for sewage buildup, you need to obtain an additional policy separately. Ask your insurance company about adding sewage buildup policy to your homeowners insurance coverage.
6. Adding New Items
If you add new items to your home, your home insurance premiums will increase. You will notice a more prominent increase in your home insurance rates when you buy a high-risk or high-end item such a new car, swimming pool, and trampoline.
7. Performing Renovations
Home renovations and improvements such as adding more square feet to your home can increase your home insurance rates. One benefit to this is that the value of your home goes up as well. The downside to performing renovations is that your future holds costly maintenance and repairs.
Your insurance company will add the costs of making those repairs when increasing your insurance premiums. Moreover, building materials and construction rates, which change with inflation, also affect your insurance rates.
8. Credit Score
A bad credit score will cause insurance companies to increase your home insurance rates. If your credit score has gone from good to bad, you will see it reflect your current home insurance premiums. When renewing your insurance coverage, they will consider your credit score when determining your new insurance rates. You should work on improving your credit score, as once you do, your insurance company will automatically decrease your home insurance premiums.
For more information on how your credit card affects your home insurance please see our blog: How Your Credit Score Affects Home Insurance Costs in Connecticut
9. Filed Many Small Claims
You may not have filed a big claim, but may have filed several small claims over the years. If you have, your insurance company will increase your home insurance premiums. All the small claims overtime will add up to forming one big claim. Before you file a small claim, consider this before you, as it can affect your insurance rates.
10. High Crime Rate
When you moved into the area, the crime rate may have been low, but over the years, the crime rate may have increased. With more crimes happening in your area, your insurance company will take note of that and increase your home insurance premiums to reflect that.
Four of the top 10 safest towns with the lowest crime rate have the least expensive average annual homeowners insurance. Read more: The Safest Towns in Connecticut in 2017
11. Exotic Animals and Certain Dog Breeds
If you own an exotic animal such as a monkey or tiger or a certain dog breed, your insurance premium will go up. You will require more liability coverage. Your animal might bite, injure, or kill another person, leading to them filing a lawsuit against you. Your insurance company will pay for the related expenses.
12. Operate a Business from Home
If you run a business from home, you will insurance premiums will increase because they would need to cover costs of computers, file cabinets, phones, and other supplies in the event of damage. By how much your insurance rates will increase depends on the type of business you operate from home.
If your customers visit your home, you will require more liability coverage in the event they slip and fall on your property. In this case, a standard homeowners insurance coverage will not apply. You will also be responsible for any medical expenses and legal damages that rise. You might need to add business insurance coverage to your insurance plan.
For more information about insuring your home business please check out: The Ultimate Guide to Insuring Your Home-Based Business
Here are a few ways you can prevent your home insurance rates from increasing:
1. Set Your Deductibles High
Your insurance coverage will not cover the small items, which is why you need to increase your deductibles. Set them as high as you can afford. For instance, your house is valued at $100,000. A house priced that much can have $1,500 or 1% deductible.
2. Add Hip Roofs
You need to install hip roofs on your home due to their slippery shape, which is ideal for storms and strong wind. You do not want any area that is susceptible to damage and catch wind. In addition to this, you can add strapping to your roof trusses.
3. Add Safety Features
You need to install safety features in your home such as smoke detectors, alarm system, surge protector for the entire house, a backup generator, and other safety features you think will keep your home insurance rates from increasing.
Other things you can add to your home to make it safe is high-tech heating, electrical, and plumbing system to decrease the risk of water damage and fire, storm shutters, earthquake-proof your home, deadbolts, and anything else you think will reduce and prevent possible damage in the future.
4. Make a Smart Moving Decision
If you are relocating or buying your first home, you need to scout the area and read up on it to see if it is prone to floods and other weather conditions that can increase your insurance rates. If your area is prone to bad weather, you can expect your insurance premiums to increase.
Prior to buying your home, you need to ask a professional to inspect your home. If the inspector determines several issues with the home, do not buy it and if you do buy it, you need to take measures to minimize the damage that can occur if flood, thunderstorms, and the like occur in your area.
You should also refer to the comprehensive loss underwriting exchange report to look at the previous homeowner’s insurance claim history before you buy the home. If the previous homeowner had filed several claims, it can influence your home insurance rates.
5. Do Not Make Small Claims
We previously discussed it, but it is important to reiterate this point, as most homeowners tend to file several small claims and then notice a spike in their insurance rates, which takes them by surprise. If you can replace something in your home without asking your insurance company for financial assistance, do it yourself.
6. Do Not Insure Your Land
In the event of a fire, your entire home will burn down and the land underneath it will likely be burnt or stolen. You only need to insure the value of your home, not your land.
7. Combine Different Insurance Policies with One Insurance Company
If you plan to combine different insurance policies, you should consider doing so with only one insurance company, not two or more. Most insurance companies tend to offer discounts if you ask them to combine more than one insurance policy. For instance, combine homeowners insurance coverage and auto insurance coverage and then get umbrella liability policy over both of them to optimize cost.
8. Opt Out of Unnecessary Insurance Coverage
You should not buy any insurance coverage that you have no use for in the future. For instance, earthquake insurance coverage is useless in most area. If you have expensive jewelry, you should buy coverage for it.
When Can You Expect Your Home Insurance Rates to Increase?
You pay homeowners insurance on a yearly basis through an escrow account. Your lender uses an escrow account add the amount of homeowners insurance due to your monthly mortgage payment. When your home insurance increases, your mortgage rate increases as well.
How often your insurance rate increases depend on multiple factors that are influenced by property and person. Some of those factors include inflation or changes to your credit score. If you do not want your home insurance rates to increase by too much, you should follow the tips mentioned here to keep your home insurance rates low.
It is also possible for you to obtain a discount from your insurance company if you have been with the same insurance company for several years. They might decrease your insurance premiums on that basis. In the end, you need to have sufficient homeowners insurance coverage to satisfy your mortgage lender and your deed of trust.
You should always aim to lower your home insurance premiums if you notice they have increased significantly. When you pay your homeowners insurance, you should keep an eye on your insurance premiums and take proper steps and measures to lower them.
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We hope you found this article helpful. Our team of agents is always here to answer any questions you may have regarding your insurance. If you need to speak with an agent, please feel free to use the chat feature in the bottom right-hand corner or contact us at 203-481-8898.
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