Rising Homeowner Insurance Rates
It seems at every turn, there is talk of rising inflation, supply chain bottlenecks, and increasing cost of construction. These ripple effects have been felt in many areas already and are now hitting very close to home; in fact, this time, it really is your home.
North Carolina operates under a free-market system: insurance carriers are free to enter and exit the market as they please. Carriers have continued to pressure the Department of Insurance for higher rates over the years. Homeowners in North Carolina will see an average statewide rate increase of 7.9% effective June 1, 2022. Although an almost 8% rate hike is staggering to many, it is significantly lower than the 24.5% increase originally proposed by the North Carolina Rate Bureau in 2020.
Some areas, including those living near the coast with a greater change of storm damage, will see an increase as high as 9.9%, while other areas, like the Triad, will see an increase closer to 5.9%. To see the specific increase in your area, click here. The good news is that rates in North Carolina will not be able to be raised again until 2024.
What Is Driving This Rate Increase?
Storms and catastrophic events have become both more frequent and more severe in recent years, causing billions of dollars’ worth of damage. On top of this, soaring building costs have drastically increased the costs to repair and rebuild homes when claims occur.
Carriers have concerns about both rate adequacy and the replacement valuation of homes across the country. Houses that may have been adequately insured at $200,000 in 2020 can now be valued at $300,000 or higher. Many carriers have been gradually increasing values at each past renewal to keep pace with rising inflations. Unfortunately, the carrier rates in North Carolina had not.
Homeowners rates in North Carolina are considerably more favorable in comparison to most of our neighboring states. A report on Insure.com lists the average cost in North Carolina at 29th out of the 50 states, compared to Tennessee (16th), South Carolina (17th), and Georgia (19th).
What Can You Do To Offset An Increase In Premiums?
INCREASE YOUR DEDUCTIBLE
It may be worth assessing the current deductible on your policy. Increasing the deductible will save money on your annual premium and may be worth considering. For example:
- Annual Premium with a $1,000 deductible = $3,200
- Annual Premium with a $2,500 deductible = $2,700
Thus, increasing from a $1,000 to a $2,500 deductible would save $500 a year in premium costs. However, you have retained additional risk; a $1,500 higher out-of-pocket expense in the event of a claim. The $500 per year premium savings is well worth the risk if you remain claim free for three or more years.
- Risk ($1,500) ÷ Reward ($500) = 3 years claim-free to break-even
Bundling all your policies (inland marine, automobile, umbrella, etc.) with your homeowners insurance carrier can provide multi-policy discounts across all your policies. This could save you anywhere from 5% to 15% or more on your premium depending on your carrier. In addition, make sure you are applying any available protection credits, such as alarms, permanently installed generators, hurricane shutters, etc. Ask your insurance advisor for a list of possible credits that your carrier offers and make sure that you aren’t leaving any discounts on the table.
RENOVATE YOUR HOME
Some home renovations lower the insurer’s exposure and your resulting premium cost. Projects that reduce the risk of damage, like a new roof or replacement of old electrical and plumbing systems may save you money year after year.
MIND YOUR CREDIT SCORE
Many carriers take into consideration your credit when purchasing insurance. Homeowners with lower credit scores have a higher statistical likelihood of filing a claim and as such are charged higher rates. Improving your credit score may lower your premium over time.
Sentinel's Private Client Services Team
Engaging with the professional Private Client Services Team at Sentinel can have a significant impact on your overall insurance program. Contact our team today for advice, guidance and counsel and allow us to Safeguard Your Success.