Home insurance premiums are rising faster than inflation »RealtyBizNews: Real estate news
If your home insurance policy needs to be renewed, prepare to be shocked. That’s because rates are rising rapidly in many parts of the country due to what insurers say is an increased risk of climate change.
While home insurance premiums have risen 4% on average, they have actually increased 11.4% since 2017, rising faster than inflation during that time, the Washington Post reported. Insurance premiums now cost an average of $ 1,398 per year.
Plus, insurance companies say homeowners should prepare for further increases.
They blame it on climate change, which caused property damage of more than $ 82 billion in 2021. Homes in areas prone to natural disasters such as tornadoes, hurricanes, wildfires and storms experienced the most significant peaks.
âClimate risk continues to put pressure on everything weather-related,â Dan Porfilio, director of insurance at the Insurance Information Institute, known as Triple-I, told the Washington Post. âWe are seeing more severe hurricanes, more severe forest fires, and the science is not as clear on tornado events in terms of whether or not they change in frequency. But what we really do know is that gravity is increasing. “
One problem is that it is becoming increasingly expensive to rebuild damaged homes due to supply constraints and rising material costs. In turn, this further increases the cost of home insurance.
Robert Dietz, chief economist for the National Association of Home Builders, told the Post that when natural disasters strike and damage hundreds of homes in a specific area, the price of building materials in those markets remains high for six to nine. months on average.
As always, some states are seeing larger increases than others. In Colorado, average annual premiums increased 21% from 2017 to 2020, while in Texas, rates increased 18% over the same period. Virginia, Maryland and California saw increases of 14.8%, 13.4% and 9.6%, respectively.
“There are some constraints on how quickly insurers can adjust their rates,” Karen Collins, associate vice president of personal insurance at the American Property and Casualty Insurance Association, told the Washington Post. “You can have [states] who have not experienced the same amount of rate increases simply because the carriers are still in this negotiated deposit process which stretches out for a long time.
On average, homeowners spend almost 2% of their household income on home insurance, according to an analysis by Bankrate.com.