Why Homeowners Insurance Rates Are Expected to Climb

According to a new Clearsurance report, Catastrophic Homeowner Losses, home insurance costs have increased by 40% over the past two years as billion-dollar weather disasters wreak havoc on properties. And now, with strains on supply chains due to the COVID-19 pandemic and more severe weather on the way, insurance rates are anticipated to climb again.

Here’s a closer look at what’s causing insurance rate hikes and how you can lower your premiums.

What’s Driving Homeowner Insurance Losses?

Homeowner insurance losses jumped 6% overall from 2019 to 2020. Clearsurance says the most significant culprits have been catastrophic insurance claims due to extreme weather.

• Wind loss costs increased by 63% in 2020 (the highest it’s been in six years). 
• 87.9% of catastrophic losses came from wind and hail perils alone.
• Catastrophic claims for hail and fire and lightning also increased in 2020.
  

The U.S. Had 18 Billion-Dollar Storms in 2021

So far in 2021, there have been 18 extreme weather events resulting in at least $1 billion of damage each. According to the National Oceanic and Atmospheric Administration (NOAA), there has been: 

• One drought.
• Two floods.
• Nine severe storms.
• Four hurricanes or tropical cyclones.
• One wildfire.
• One winter storm.

These extreme weather events have led to more than $100 billion in combined damage, making it the fourth most costly year for storms the U.S. has seen in 31 years.

2020 also had a lot of extreme weather events, and 2022 is expected to follow suit. Clearsurance says the rising number of catastrophic events in the U.S. has increased rates for many homeowners across the country. 

COVID-19 Has Led to Rising Home Repair Costs

It’s not just severe weather that has shaken up homeowner insurance losses. COVID-19 is also to blame.  

The pandemic has sent shock waves through the supply chain as prices for lumber, steel, copper, cement, and other building materials have skyrocketed. And in many cases, home insurance companies have had to shoulder the cost. 

With the cost of covering claims going up, Clearsurance says many insurers have had to pass the expenses to their customers in the form of higher rates.

How to Reduce Your Homeowner Insurance Rates

So, what does this mean for you as a homeowner? How can you lower your home insurance rates and the cost of filing a claim — whether it’s related to a catastrophic event or not? Clearsurance gives the following recommendations.

Do the “Loss Adjustment Expenditure” Process Yourself

When you file a homeowners insurance claim, your insurer usually has to investigate to settle it, a process known as the “Loss Adjustment Expenditure.” While a hired investigator traditionally performs this, some insurance companies let you do it yourself, thanks to technology. 

The process is simple; all you have to do is submit a description of your damage, along with photos for proof. Clearsurance says sending your claims information to your insurer may not result in a lower rate but could speed up the claims and payment process.

Think Twice Before Filing Small Claims

Any time you file a claim, there’s a chance your insurer will increase your premium. So, before filing for minor damage, consider if you could comfortably pay for the repair yourself. If so, Clearsurance says you may come out ahead compared to having your premium go up.

Look For Ways to Disaster-Proof Your Home

If your home does get damaged by a severe weather event, use it as an opportunity to upgrade your home’s materials. That could include retrofitting against earthquakes, revamping your electrical system, or installing hurricane shutters.

If your insurance company thinks improvements decrease your likelihood of filing a future claim, Clearsurance says they may reduce your rate. 

Shop Around for Cheaper Home Insurance Rates

A tried and true method for reducing home insurance premiums is to shop around for better rates. Whether you’re looking for the best homeowners insurance for new builds or older homes, comparing policies online could result in huge savings.

Importance of Homeowners Insurance

Hurricanes, floods, and other weather-related disasters cost homeowners billions of dollars in damage each year. And COVID-related supply chain issues only make it more challenging to complete needed repairs. Use these tips to protect yourself against future claims and lower your home insurance costs. 

Read Clearsurance’s complete report: COVID-19 and Weather Events Drive Catastrophic Homeowner Insurance Losses.