Why Is Your Property Insurance So High? 10 Ways to Lower the Cost

Editor's Note: This story originally appeared on NewRetirement.

Inflation comes in many guises. In some areas of the country, the cost of insurance, particularly property insurance, is rising dramatically faster than the currently high general inflation rate.

One participant in the NewRetirement Facebook group recently reported: “Our homeowners insurance bill just came in and reflects a 22% increase over last year. That’s after a 15% increase last year over the previous year. Prior to that it was a reasonable 4% increase per year.”

There are multiple reasons for increasing property insurance costs. Following is an explanation for the rapid rise and how you can lower your costs.

Why Are Property Insurance Costs Increasing?

Home values have increased tremendously, rising (on average) to their highest values ever. So, because the replacement value of your home goes up, so too does the insurance covering that home.

Most insurers increase your coverage to keep pace with an increase in the home’s value, based on your ZIP code. But that’s not the only reason for the spike in prices.

Rising Labor and Materials Costs

Home values are high, but so are costs for materials and labor. If you were to need to rebuild your home after a disaster, it would cost much more to do that today than it would have a year or two ago.

Increasingly Common Natural Disasters

In some areas, insurance costs are going up due to the increased risks of fires, storms, or floods. In fact, in many communities in California and Florida, insurers have gone beyond raising rates and now refuse to insure certain homes that they deem particularly at risk.

In California, whole cities are being denied property insurance. In other places, it is just the homes on the edge of wilderness areas.

In Florida, Howard reports, “Insurers are dropping customers if a roof is over a certain age, such as 15 years old. We’ve had to change carriers almost every year.”

You can potentially save yourself thousands of dollars by taking steps to lower your insurance costs. Here’s how.

1. Shop Around

As Howard wrote, “For insurance… you should always shop till you drop.”

Tom shared his cost-saving experiences, “I shop my policy every three years. I send my declaration page to several trusted agents. I do the same with my auto policy. This exercise has served me well over the decades.”

2. Don’t Rule Out Insurers You Previously Deemed Too Expensive

If you get a high quote one month from an insurer, don’t assume that the rates will be the same if you inquire next month or next year.

Insurance agencies are coming into and out of the market constantly and are frequently adjusting coverage and rates. Insurance can be very fluid, changing all the time.

One insurer with over 22 years in the industry told the San Francisco Chronicle, “your insurance quote might depend on the day the inquiry is made.”

3. Shop Around Yearly (or at Least Every 3 Years)

It’s a pain to shop for insurance. However, doing so can save you thousands.

Many people only seek discounted insurance when they notice a rate change. However, others set a reminder to shop their insurance options annually.

Shopping for your insurance is a good financial habit.

4. Shop Around, but Try to Get Apples-to-Apples Comparisons

When shopping for insurance, you need to look at the details, not just the costs.

You want to know how much is covered and under what circumstances. When shopping, review:

• Coverage limits (should be an amount adequate to completely rebuild your home)
• Deductible (the portion of the repair costs you are responsible for)
• Liability limit (covering damage to other people and their property)
• Medical payments (covering medical costs of someone injured on your property)
• Personal property coverage (your possessions)
• Extra coverage (also known as hazard insurance)
• Loss of use (living expense coverage if you can not reside in your home)
• Other add-ons

You should pay particular attention to the type of replacement being offered by the insurer. Are they offering actual cash value or replacement value?

If you are insured with “actual cost value,” then you will only get what the item could be sold for. Property covered with “replacement value” means that the insurer will cover what it would cost to replace the damaged items with new.

5. Shop Around and Bundle Your Home, Auto and Umbrella Insurance

Bundling your insurance, getting multiple insurance types – home, auto, and umbrella coverage – from one company is estimated to save you about 25%.

Glen recommended bundling. “This year (compared to last year), our house valuation went up about 25% with a corresponding increase in our premium. To some degree, that was understandable. However, when I shopped around, I found a company (nationally recognized) that was substantially lower. In fact, when I bundled home, auto, and umbrella, the total was less than what I paid last year (and it included the increase in property valuation plus a 50% overage).”

6. Use an Independent Agent (or Do It Yourself)

Independent agents: Some people are big fans and others think that the best way to find the lowest rates is to do it yourself.

7. Compare This Year’s Coverage to Last Year’s and Talk to Your Insurer

Insurance companies can change the coverage parameters. By comparing what they are covering this year to last, you can make a more informed assessment of the rate increases and potentially adjust the coverage to reduce your cost.

Said Linda, “On closer review, they [the insurer] added new stuff that I didn’t need or want. I brought mine down $700 a year by comparing last year’s to my new bill.”

8. Relocate

Kelly reported, “We are in a moderate wildfire zone and our premium increased 50% from $4,000 to $8,000. Our solution? We are moving to Idaho.”

Relocation, especially in retirement, can be desirable from both a lifestyle and cost perspective. Housing, cost of living, insurance, and other costs should be assessed when considering relocation.

9. Watch Out for Expiring New Customer Rates

Insurers, like cable providers, will often rope in business with a “new customer rate.”

If your insurance has jumped significantly, be sure to understand why. Did your introductory rate expire? Talk to your insurer about the increase and see how they propose to reduce your cost.

10. Look at Public Insurance Options

Some states have developed limited property insurance options for homeowners who can not get private insurance. California has the FAIR Plan. It subsidizes an increasing number of homes in the footprint of fire or otherwise dangerous environmental outcomes.