Does Home Insurance Rates Go Up Yearly?


As a homeowner, the chances are that you enjoy the peace of mind that comes with securing your home with the insurance policy. You, however, feel irked when you notice the interest rates increase every year.

You might be wondering if the rates should keep on rising, or it’s a way the insurance company tricks you.

The truth is the insurance companies adjust the rates every year to reflect on the prevailing risk factors. Here are some of the reasons why your insurance rates increase.

  • Inflation

The insurance rates change mirror those of the inflation rates. A higher inflation rate would mean an increase in your insurance rates due to the ripple effects on the economy.

For example, an inflation rate of 2.0% would mean an increase in construction costs. These costs would mean rebuilding your home become costly, hence the higher insurance rates.

  • Changes to the house

Significant changes in your home change the risk factors. For example, home improvements increase the risk; hence you might have to incur extra charges. If you have included newer units in your home, then the value goes up, therefore the higher premiums.

The house will also undergo everyday wear and tear. The insurance company must adjust the rates to reflect the current state of your home.

  • Credit rating

Many places like home insurance Los Angeles factor in credit score when calculating the insurance rates. A change in your credit rating would reflect on the insurance rates.

A healthy credit rating comes with lower insurance rates due to the lower associated risks. Messing up the credit rating after some time would mean you have to pay more.

Keep your credit rating healthy by paying your bills on time and avoiding credit.

  • Claims history

Your claims history, no matter how insignificant, impacts your insurance prices. Immediately you make a claim; the insurance adjusts the rates depending on the risks.

For example, a natural disaster claim does not increase your insurance rates as much as a non-catastrophic would. Some of the claims that would increase your rates significantly include water damage, theft, liability, and dog bites.

  • Increase in local crime rates

The crime rate in your area determines the insurance rates. A higher crime rate sets you up as an easy target for theft and other risk factors. The insurance company would compensate this when calculating the rates. If the crime rates increase at a given period, then be sure your rates will also increase.

  • Several homes in your area using the same insurance company

You might think having everyone in your locality using the same insurance company policy would mean lower rates. You’re mistaken. Insuring several homes from a locality concentrates the risks. For example, a single catastrophe and the insurance company will have to compensate hundreds of homes. The insurance company would increase the rates until some people in the area move to other service providers.

Bottom Line

The next time you realize changes in your insurance rates, don’t be quick to point out foul play. Look into the various risk factor changes around your home before you launch a complaint. However, do not hesitate to contact the insurance company for clarification on the changes.

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