How High Could Home Insurance Rates Jump This Year? Here's What Experts Predict
When your homeowners insurance policy comes up for renewal in 2024, be prepared for an unpleasant shock: You’re likely to face a premium increase of 10% to 15%, and the price jump could be much higher if you live in an area where there's risk of wildfires or severe storms. That's assuming you can find home insurance coverage at all.
Home insurance costs have soared recently, and policy renewal data shows that premiums have been increasing by more than 20% year-over-year, according to separate reports from insurance firm Matic and insurance marketplace Policygenius released in late 2023.
According to Matic, the national average annual cost of home insurance climbed to about $1,700 in 2023, up from $1,175 in 2019.
Rising prices have added stress on household budgets, and the number of people skipping home insurance coverage altogether has also soared.
While the rate of inflation in home insurance prices is expected to slow down this year, Stuart Winchester, founder and CEO of Marble, says he’s counseling customers to still expect 10% to 15% hikes. That would translate to premium increases of $100 to $250 for the year — or hundreds more for customers in areas where home values or insurance rates are higher.
Citing a “rise in catastrophic events nationwide,” Matic predicts that insurance companies will continue to significantly increase premiums because they need to pass along their higher costs to policyholders. However, “as inflation slows down in 2024, it’s not likely that premiums will rise at the record-high rates seen in 2023.” Notably, construction costs soared during the pandemic, but should be more stable going forward as inflation cools.
Why is home insurance so expensive?
The high number claims in the the last few years, which far exceeded what actuaries predicted, is the primary reason why home insurance is getting so expensive, says Matt Simon, president of CoverLink Insurance and an agent at Trusted Choice. Last year, 28 individual weather and climate events resulted in at least $1 billion of damages, up from a previous high of 22 in 2020, according to government data.
Beyond disaster risk, Loretta Worters, spokesperson at the Insurance Information Institute, says, "Much of the increase can be attributed to supply-chain issues and labor shortages driving up the cost of home repairs and replacement." She also points to several other issues that insurers are facing, including fraud, excessive claims and legal system abuse.
Amid these trends, insurers will likely push to implement higher rates in 2024. Still, several factors suggest that premiums won’t increase quite as much in 2024 as they did last year.
Inflation has eased in many areas of the economy, and as prices for home repairs and the costs of replacing home products stabilize, insurance companies shouldn't need to increase premiums at such a fast pace. Also, after getting many rate hikes enacted in the past two years, insurance companies have, at least to an extent, already corrected for their pricing issues.
But insurance prices typically increase with inflation on a lagged timeline. Insurers must go through state regulators before they can increase premiums, and those processes take months. Even once a rate increase is approved, it can take as long as a year for the new rate to kick in because policy renewal happens every 12 months.
Depending on your home insurance company and where you live, you may have already been hit with a major premium hike, or one could be coming at some point this year.
“There's a delay between inflationary impacts and pricing for homeowners insurance because of the regulatory environment,” says Matthew Carrier, principal at Deloitte Consulting. “I think the cooling off of inflation will dampen the amount of rate increases coming through homeowners, but it's going to be delayed.”
Home insurance availability is more limited
Not only are home insurance policies much more expensive now than they were a few years ago, they’re also getting harder for customers to find.
In California, where wildfire concerns have snowballed since 2017, some insurers discontinued their home insurance businesses last year or limited underwriting.
“There’s a very large portion of the insurers in the market that are not writing new business," says Tom Larsen, associate vice president of hazard and risk management at CoreLogic.
Some of the companies that stopped writing new policies are now getting huge rate increases. For example, after halting new business in 2023, California's largest insurer, State Farm, recently obtained approval for a 20% premium increase for renewals that will be effective in March. Allstate, which also has a pause on new homeowners policies, requested a 39.6% rate increase, which the California Department of Insurance says is still under review.
In Florida, where the main risk is hurricanes, Larsen says the insurance market is even less competitive than California's. Florida home insurance premiums increased by an average of 35% at renewal during the period from May 2022 to May 2023. Companies are still pushing for higher rates in 2024. In one of the most extreme cases, an Allstate subsidiary that insures condos in Florida is pursuing a 53.5% rate hike affecting 105,000 units.
Many homeowners in the state don’t even have access to any of the major insurance companies that operate nationwide, which Larsen says are the most stable and highest-rated companies. The situation got worse in 2023. In July, for example, Farmers stopped offering its own-branded home insurance in Florida, affecting about 100,000 policies.
According to Matic, insurance options have also become more limited for new customers in states including Georgia, South Carolina, New Jersey, New York and Arizona. This might mean that someone who had six home insurance options in 2022 might only have two or three choices now, Winchester says.
Later in 2024, experts say insurance will become more available nationwide as rate increases kick in, but availability likely won’t return to normal levels last seen in 2020.
The lack of options is frustrating for homeowners. If you're facing a premium increase, the advice is always to compare quotes from as many companies as you can to see if you can save with a competitor. But in disaster-prone states, the options may be very limited (and expensive) right now.
While there’s no question that an increase in serious weather events has coincided with rising inflation, consumer advocates dispute the necessity of the large rate increases that are being approved, arguing that insurance companies are being opportunistic.
Now that regulators are granting higher rates — recognizing the need to make sure insurance remains available — Winchester says insurance companies, which have taken major losses in the past few years, are surely thinking, “How high can we push this?” The answer to that question, in addition to trends in home repair costs, could determine how much premiums rise in 2024 and beyond.
How to pay less for home insurance
Experts recommend getting at least three price quotes when you shop for home insurance, and it's smart to compare options on an annual basis.
Hardening your home to better withstand extreme weather events can also result in savings, especially in disaster-prone areas. (There are sometimes discounts for installing storm-protected windows, for example.)
Other ways to save on home insurance include opting for a higher deductible, bundling your policy with auto insurance and improving your credit score.
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