Why is Homeowners Insurance So High?

In this economy, most consumers may anticipate that their homeowner's insurance rates will increase this year, including the cost of materials and supplies.

Multiple variables are responsible for the growth rates. The increasing frequency of severe weather occurrences results in more significant property damage and higher insurance claims costs. The increased cost of construction supplies, supply chain concerns, and unfilled positions due to COVID-19 interruptions are driving up the price of house repairs.

What are the primary drivers of rising home insurance premiums?

Extreme Weather and Natural Disasters

Other extreme weather occurrences, such as hurricanes, floods, droughts, and wildfires, have become more common, damaging, and expensive. In 2021 alone, the United States experienced 20 weather-related catastrophes, with individual damages surpassing $1 billion. As weather-related damages increase, so does the overall cost of insurance. Typically, insurers change prices state-by-state depending on actual and expected weather-related losses.

Increasing Material Prices

The cost to restore or rebuild a property after a loss is essential in determining the price of homeowners insurance. These costs have increased substantially throughout the pandemic due to:

• An increase in the overall demand for house remodeling.

• An overall increase in new construction demand.

• Supply chain interruptions in the U.S. and internationally.

• These issues have led to limited supplies and higher pricing for the majority of construction materials. Consider the following price increases effective October 2021:

• Over the past year, material goods for new homes have increased by 18.6%.

• Wood and wood products have increased by 6.2%.

• Since last year, asphalt roofing materials have increased by 16.3%.

• As construction prices rise, so do the costs of repairing or replacing homes destroyed by covered perils.

Even while new home and remodeling projects are rising, the construction industry faces a skilled labor shortage. As of August 2021, the sector had 358,000 job opportunities, which is more than twice the yearly projection.

Present market conditions are challenging. Extreme weather occurrences are increasing. Disruptions caused by the pandemic, such as building materials and skilled personnel shortages, are forcing rate fluctuations. However, variables within your control affect the rates you pay. It is intelligent to make use of them.