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Published: Mar 28, 2024 12 min read

Americans are shelling out more and more for home insurance as companies enact steep rate hikes, making it extra important to ensure you have the right policy.

Despite a lower overall rate of inflation in 2024, insurance costs continue to soar. One big reason is the large number of expensive disasters in recent years including hurricanes, floods and wildfires. According to the National Oceanic and Atmospheric Administration, 28 catastrophic events in 2023 cost $1 billion or more — a record.

Homeowners insurance prices also tend to be one of the last things to go up when the economy experiences inflation. That's because it takes time for insurers to go through the regulatory processes for raising rates and more time to then hike premiums when customers' policies come up renewal.

Insurers have been dealing with higher costs for home repairs and other things since inflation heated up in 2021, but some customers are only just now getting their first big premium increase. If your premium is about to go up — or if you're struggling to find an affordable new policy — here's what you need to know about how to get affordable home insurance.

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How to lower your home insurance premiums

Some experts are forecasting double-digit increases in home insurance costs this year on top of major price hikes since 2021. The good news is there are a number of ways you can save money on home insurance even in this era of rising costs.

Get a higher deductible

Home insurance is designed to be used for significant repairs, and it doesn’t cover wear and tear or routine upgrades on a property. While a low deductible means your out-of-pocket cost will be lower if and when you need to use your home insurance, that’s usually a rare occurrence for most homeowners. Also, filing small claims can cause your premium to go up, so that's generally something people try to avoid.

By selecting a policy with a higher deductible, you’ll get a lower premium. Yes, it’s important to have a plan to have enough money to pay your deductible if you need to use the insurance.

But think of it this way: If a major disaster damages your house and your insurance covers $200,000 of repairs, a difference of $500 or $1,000 in your deductible will seem small in the grand scheme of things.

Bundle home and auto insurance

Using the same company for these two types of insurance can often result in savings. This is known as bundling home and auto insurance, and some companies say you can save as much as 25% if you give them your business for both policies.

In addition to potentially saving money, you’ll also streamline your monthly bill payments because you’re dealing with one fewer company.

Bundling is just one of several types of discounts for home insurance. Others include payment method discounts and loyalty discounts.

Select the right amount of coverage

It may sound obvious, but don’t pay for more home insurance than you need: It doesn’t get you anything.

In most situations, you’ll want to have enough homeowners insurance coverage to completely rebuild your home and replace possessions. You don’t need to match your coverage limit to the value of your home because that include the value of your land, which you’ll still have even if a total disaster strikes. Also, the value of your structure is not necessarily equivalent to the cost of rebuilding — it could be more or less.

Mortgage lenders have coverage requirements and insurance companies typically recommend a coverage amount, but it's advisable to do your own research and calculations as well.

Improve your home's insurability

Well-maintained homes are more attractive to insurers because there’s less risk of a peril like bad weather causing damage that would trigger a claim. And the lower the likelihood of claims, the lower the risk — and the lower the premium.

For example, a house with a 5-year-old roof is a better deal for an insurance provider than one with a 20-year-old roof, says Meg O'Toole Herman, an agency owner with Goosehead Insurance in Hilton Head, South Carolina. A newer roof has a better chance of coming through a storm without damage than an older one.

Major upgrades can make your home more insurable, such as upgrading electrical, heating and cooling systems. But there are also small affordable projects that can improve your chances of getting a lower premium.

Installing smoke alarms or plumbing leak detectors and having a security system are other relatively economical ways to reduce your odds of filing a claim — and make your home a lower risk for an insurance company.

Shop around

When choosing a new insurance provider, the more options you can compare, the better.

Shopping around is important because the policy amounts, exclusions, deductibles and rates are different for every insurance provider. The only way to know if you're getting the right coverage and rate is by comparing what each company offers and choosing the one that best fits your needs.

But it can be overwhelming to gather all the information on your own. It’s not only time-consuming but also confusing, especially if you’re not familiar with the terminology used in policy descriptions.

Independent agents can be helpful. They work with different insurance companies, including admitted and non-admitted carriers, and can do much of the comparison legwork for you, from comparing costs to finding the proper coverage.

They can also explain the differences between policies, how the deductibles work and any gaps in coverage that may make one policy a better option. Local agents will also be familiar with critical coverage needed for your area. For example, wind and hail coverage isn’t the same as hurricane coverage, a distinction that might not be immediately apparent.

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How much does home insurance cost?

The national average annual cost of home insurance climbed to $1,723 in 2023, up from $1,276 in 2021, according to Guaranteed Rate Insurance, a national brokerage.

Insurance premiums are projected to increase by 10% to 15% this year. Some of the hardest-hit markets include Florida, Colorado and Texas.

Tips for tough markets

Homeowners living in states that typically have more natural disasters such as hurricanes and wildfires have some difficult choices to make.

Not only are costs increasing, but several insurance companies have either gone bankrupt or decided to pull out of high-risk markets altogether. This has led to companies issuing non-renewal notices or declining to write new policies, which is leaving some homeowners scrambling to find alternatives.

Many companies deciding to step away from certain states are doing so because of high insurance costs and payouts in recent years. In Louisiana, for example, insurance companies paid a total of more than $40 billion for damages caused by hurricanes Ida, Laura, Delta and Zeta.

The following tips can help you find an alternative if your homeowner's insurance isn’t renewed or you need a new policy in a disaster-prone market.

Be proactive

Don’t wait until the last minute to look for a new insurance carrier. If you receive a non-renewal letter, take note of the date when coverage will end, and start searching for an alternative.

Note that by law, insurers are required to give you plenty of time to find another provider. The time frame will vary by state, but a 30- to 60-day notice is standard.

You’ll want to jump-start your search, Herman says, because insurance companies may limit the number of policies they write each year. It’s a way of taking on a manageable amount of risk, she adds. If you’re one of many who have received a notice of non-renewal, you won’t be the only homeowner looking for a replacement. The sooner you start, the better.

Know the insurance provider types

Not all insurance companies operate the same way. There are two types of carriers, and it’s important to know how they differ.

Admitted insurance carriers are licensed to operate within a market by that state’s insurance agencies. They must follow the established regulations regarding rate approvals, claims handling and policy forms. Registering with the state provides a layer of security for the policyholder if the insurer becomes insolvent or there’s a disputed claim. An example of an admitted insurance carrier is Progressive.

Non-admitted carriers, or excess and surplus line providers, are licensed to provide insurance but don’t follow state regulations and guidelines. This type of carrier may be riskier in the sense that if they become insolvent or there is a disputed claim, you don’t have recourse with the state. An example of a non-admitted carrier is Lloyd’s of London.

“[Non-admitted carriers] offer consumers access to more specialized products that provide higher liability limits and greater policy flexibility,” says Joe Gilmartin, a Goosehead insurance agent in Ontario, California.

In high-risk markets where admitted insurance providers are opting to leave, a non-admitted carrier may step in and provide the coverage you need, Herman says. But keep in mind that these policies may be more expensive than those offered by admitted companies.

Consider state-backed coverage

Many states provide state-backed homeowners insurance, to replace or supplement private coverage. In Florida, it’s called Citizens Property Insurance. In California, it’s the FAIR plan. Louisiana, the Carolinas and other states have similar insurance options.

These often provide coverage as a last resort in cases where it’s impossible to find another source of insurance, even from a non-admitted carrier. But the state program tends to offer limited coverage. You may have to supplement it with a policy from a private insurer to make sure you’re fully protected from all perils.

Regarding cost, state-backed plans won’t necessarily be less expensive than private insurers' plans. In some states, the premiums can be competitive with excess lines coverage. However, in others, as is the case of California’s FAIR plan, these policies can cost more than those of more traditional insurance policies, Gilmartin says.

If you live in a high flood-risk area, know that most homeowners insurance policies won’t cover flood damage. You’ll need to obtain a separate flood policy from your insurer (or other provider) or enroll in the National Flood Insurance Program (NFIP), run by the Federal Emergency Management Agency (FEMA).

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