I came across this awesome article in an Erie Sense magazine the other day and wanted to share some of the information. To give you a little background, the article was located in a section of the magazine titled “Ask Erie.” Someone asked the question, Why did my neighbor’s homeowners insurance premium go up, without a claim? The response to the question was very complex and overall very helpful. Therefore, I wanted to share the information just incase you were wondering the same thing.
Pricing homeowners insurance is complex, and there are probably several reasons behind your neighbor’s homeowners insurance premium increase. They could include:
- Inflation: Increases in the value of his dwelling, the other structures on his property and the replacement cost of his property would make his premium go up. “Though there’s an increase, it’s really a good thing since it means your property is adequately covered,” says Terry McConnell, ERIE’s vice president and manager, Personal Lines Underwriting.
- Increased catastrophes: The increased frequency and severity of catastrophes over the past five years have made homeowners prices more volatile than auto insurance prices since you can’t exactly move your home out of harm’s way. Sometimes, less newsworthy weather events cause the most damage. “People always think of hurricanes when they think of catastrophes, but some of our biggest losses come from thunderstorms, hail, winter storms and tornados,” says McConnell. Insurers adjust prices based on how much damage your particular state experienced. If your state didn’t suffer much, you can typically expect little or no increase.
- Construction costs driven by a shortage of materials: Even if a catastrophe occurs on the other side of the country, it can still have implications on your neighbor’s homeowners rate. That’s because widespread damage causes a shortage of building materials, which drives up their price for everyone. (Labor shortages increase the cost of construction projects as well.)
- Changes in previous discounts: Finally, your neighbor might have seen an increase in his homeowners premium if some of his discounts were reduced or expired. For example, a new home discount will lessen as a home ages.
- 4 Tips for Reducing Auto Insurance Premium Costs (cheapcarinsurance.net)
- Texas Senator: How Can We Lower Homeowner Insurance Costs? (insurancejournal.com)