ValuePenguin, a LendingTree company started in 2013 focused on empowering consumers with the right tools, information, and resources to help them make better informed decisions, has authored a new article on the ever-rising cost of homeowners insurance and the factors behind these rises.
On its face, regardless of whether homeowners experienced rate hikes, most policyholders who experienced a rate hike (72%) blamed inflation, rising house prices (51%), and climate change (25%) for these increases.
Key finding from the report include:
- Like most things these days, home insurance costs are rising. Among home insurance policyholders, 72% experienced rate hikes in 2023, and 34% say their premiums are more difficult to afford than before. 37% of those who experienced rate hikes in 2023 reported increases of 5% to 9.99% and 24% reported growth of 10% to 29.99%. Whether they experienced rate hikes, policyholders blamed inflation (72%), rising home prices (51%) and climate change (25%) for insurance increases.
- Most policyholders expect insurance rates to continue to climb—and some question future insurability. Three-quarters (75%) expect rate increases this year, and over a quarter (26%) are worried their homes will become uninsurable. This worry is warranted for some, as 19% of policyholders report receiving a nonrenewal notice from their provider.
- Many are weighing options to save money on home insurance. 54% of policyholders have shopped around for homeowners insurance, saving an average of $474 annually. Additionally, 52% of policyholders have asked insurers for discounts, with those successful saving an average of $472 a year. And 28% have downgraded their coverage, saving $414.
- Not everyone reviews their policies, though. Most policyholders (87%) haven’t updated or changed their current home insurance policy in at least a year, with 49% reporting they’ve had their current policy for more than five years. This comes as 37% of policyholders say their insurer has changed the terms of their existing policy — sometimes by raising their deductible (13% of policyholders), adding surcharges (11%) or dropping coverage (8%).
- Americans are split on whether the government should step in. 52% of policyholders think the federal government should intervene in the homeowners insurance market. Younger policyholders are more likely to share this sentiment — 61% of millennials, versus 43% of baby boomers.
Looking at this data another way—by generation—baby boomers aged 60 to 78-years-old with home insurance policies were the most likely to experience rate hikes in 2023 at a rate of 78%. They are followed by 73% of millennials (now 28-43-years-old), and 64% of Gen Xers (now 44-59-years-old).
Meanwhile, those with children 18 or older (75%) and those with children younger than 18 (74%) were more likely than those without children (68%) to experience rate hikes. By income, households earning less than $30,000 (68%) were the least likely to experience rate hikes, while six-figure earners and those earning $30,000 to $49,999 tied as the most likely, at 74%.
With these rate hikes in mind, 34% of home insurance policyholders say their premiums are more difficult to afford than before. By age group, millennials (41%) are most likely to say they struggle to afford their homeowners insurance, while baby boomers (27%) are least likely.
As far as how much more they’re paying, 37% of those who experienced rate hikes in 2023 reported increases of 5% to 9.99%—the most common jump. Nearly a quarter (24%) reported increases of 10% to 29.99%. Breaking that down further:
- 26% of this group saw insurance premiums rise less than 5%
- 37% saw premiums rise 5% to 9.99%
- 18% saw premiums rise 10% to 19.99%
- 6% saw premiums rise 20% to 29.99%
- 3% saw premiums rise 30% or more
- 10% don’t know how much premiums rose
Regardless of whether they experienced rate hikes, 72% of insurance policyholders blamed inflation for insurance increases—the most common response. After that, policyholders cited:
- Rising home prices (51%)
- Homeowners filing more claims (35%)
- Insurance company greed (32%)
- Climate change (25%)
- Labor shortages (12%)
Looking ahead, the majority of homeowners expect rate hikes in 2024 at a rate of 75%; particularly baby boomers (79%), six-figure earners (79%), women (76%) and those with children 18 or older (76%).
According to ValuePenguin home insurance expert Divya Sangameshwar, policyholders are right to have this expectation.
“A huge part of this comes down to the rising volume and cost of claims,” she says. “Climate change has led to increases in the number and severity of hurricanes, floods, tornadoes, drought, heat waves and other harsh weather, which have led to a spike in the volume of claims in many parts of the country.”
Click here to see the report in its entirety, including additional graphs and charts.
