Insurance rates are mostly on the rise. Here are the prime factors driving the increases.

Key Takeaways:

  • Home insurance rates have increased an average of 4 percent in 2022 compared to 2021.
  • New disaster zones, more expensive building materials, and ongoing labor shortages have all contributed to higher premiums.
  • Homeowners can take steps to save, including reducing their property’s risk profile

Home insurance is an essential aspect of homeownership, but it’s a significant expense. Value Penguin puts the national average policy cost at $1,680 a year ($140 per month). New York ranked 28th on the list of the most expensive states for home insurance, with residents paying an average of $1,500 a year ($125 monthly).

Homeowners everywhere could be seeing their premiums increase in 2022, regardless of where they live. Multi-sector disruptions caused by ongoing global events have already sent significant ripples through the home insurance industry. Let’s look at where these upsets are coming from and if they’re expected to continue.

How 2021 set the trend for home insurance prices

Forbes editor Jason Metz closed out 2021 by identifying the three biggest contributors to volatile home insurance prices last year: inflation, a reduced labor pool, and supply chain disruptions, all of which were fallout effects from the pandemic. More costly building materials with fewer professionals available to utilize them led to a lag in construction. Meanwhile, people were still looking for homes at the same rate.

Cue a rise in new construction and renovation costs to meet expenses and demand. This was bad news for new homebuyers already looking for their first home insurance policy. It was also a negative for people who had settled into their homes and might need repairs or a replacement home. The original sum they’d insured the property and its contents for was no longer enough to cover things if disaster struck due to the costs of some items rising at double the rate of inflation.

Damaging weather events are also a factor pushing up home insurance rates. As the nation discovered in 2021, wild weather shows no signs of diminishing. And many homes in areas once deemed relatively safe from earthquakes, floods, and other events now find themselves in newly classified risk categories with higher premiums to match.

Meet the new year (same as the old one)

Metz was accurate in predicting that 2022 rates would continue to rise based on the factors that impacted 2021. Earlier this year, The Washington Post reported that homeowners nationwide were getting a nasty surprise when renewing their home insurance policies — an average four percent increase.

Worse, many of the nation’s top home insurance providers were reported to only be providing replacement value policies. Since replacement value can be dramatically different from market price due to inflation and shifts in land value, some homeowners had difficult options: be vulnerable with inadequate coverage or pay much higher premiums.

And while an impressive number of jobs were added to the construction sector last year, there just aren’t enough people to fill open positions. Thus, the labor shortage also looks set to continue. Homebuilders know qualified workers are a precious commodity, and they’ll charge more for their services to attract and keep employees. This labor shortage and more expensive materials are likely to continue contributing to increased home insurance rates.

What to do for better home insurance rates in 2022

There’s not a lot that homeowners can do when it comes to inflation and labor shortages. Thankfully, how weather affects their coverage is a slightly different matter. We took a closer look at how weather events impact home insurance rates in our previous blog, offering advice on what policyholders can do to stay on top of things.

That guidance included taking out flood insurance and altering your home’s exterior to stand up to the elements. Limiting your property’s risk for indoor disasters and crime also goes a long way in keeping premiums as stable as possible. The safer you are, the less of an insurance liability you’ll be — so invest in smoke detectors and high-quality locks for windows and doors.

Upping your home insurance deductible isn’t a catch-all approach, but it can always be relied on to lower your rates. Insurance companies will have to shoulder less financial risk (great for them), and it can curb homeowners’ tendencies to submit numerous small claims.

This solution isn’t for everyone, however. Instead, you might opt to regularly price all the objects in your home to account for depreciation. You could save on home insurance if they’re cheaper to replace now than when you first bought them.

Another classic money-saver is grouping multiple coverage types together with the same carrier. Homeowners who are also car, motorcycle, or boat owners could get coverage for everything from one provider and potentially enjoy lower premiums. Throw life insurance into the mix, and the odds of saving increase.

Contact NICRIS to find the best home insurance rates

Home coverage costs may prove volatile through this and next year. But NICRIS takes the time to assess your present circumstances and future goals to find the best and most affordable coverage. Get an instant quote, book a free, personalized insurance review, or contact us with any home insurance questions!