Will Homeowners Insurance Rates Increase in 2024?
If you’re someone who just received your homeowners insurance renewal, then listen up!
Today, Jennifer’s question from Colorado Springs is being answered.
Jennifer asked: Will my home insurance go up again in 2024?
Well, Jennifer, the short answer is… “yes, more than likely your insurance will be increasing again in 2024 even if you do not have a claim. We will do everything we can to save you money, but we may see an increase.”
Factors Behind Increasing Home Insurance Rates
“But, Tia, that doesn’t seem fair… why are you predicting home insurance to increase in 2024?” was Jennifer’s response.
So let’s dig into why we think there will be increases in 2024.
Industry Outlook
First, let’s start with a statement from a Senior Director at AM Best, Richard Attanasio: “The issues for home insurance companies are so acute that our credit rating agency, AM Best, recently downgraded the home insurance industry from stable to negative.”
This is not just one carrier but the entire sector of the industry. This is concerning, and there are several contributing factors to why insurance companies must increase rates.
Impact of Weather-Related Claims
First, fewer weather and fire-related claims in 2024 would help to stabilize insurance rates. Unfortunately, this is not being predicted based on the uptick of insurance losses in the last four years.
Severe weather and the potential for significant storms racking up costly claims are making many home insurance companies rethink their coverage and premiums.
Severe climate hazards are behind cost and insurability issues in many locations. That includes wildfires in the West, hurricanes along the Gulf Coast, and flooding in inland areas. So, even if you do not live in one of these areas, rates across the US are increasing as insurance companies try to make up losses across the entire risk pool.
Major insurers, including Allstate, Farmers, Nationwide, and State Farm, have pulled out of or reduced coverage in high-risk areas in response to claims from extreme weather events. This creates more issues for homeowners as they have fewer choices for their home insurance.
Destructive wildfires are a growing concern in the West. There are estimates that wildfires have led to a 215% increase in the number of structures destroyed, despite the total area burned increasing at a much lower rate of only 48%.
Rising Construction Costs
Second, rebuilding materials are still inflated, and to make matters worse, skilled construction wages have exploded since the pandemic.
Over 82% of construction materials increased significantly in cost since 2020, with an average jump of 19%, according to Gordian, a construction cost data tracking firm. Though some costs have begun to decrease, Gordian says material costs remain “volatile.”
Building material cost increases in 2023 included:
- A 16% increase in wood
- 15% increase in concrete and masonry
- 11% increase in insulation
- 12% increase in electrical conduit work
- 22% increase in steel
Also, we have seen a 29% increase in construction wages in the last four years.
Reinsurance Challenges
The third reason why rates are increasing is reinsurance investors are looking for safer investments with better returns and are avoiding home insurance risks. This is causing insurance companies’ operational costs to explode. We did a video on this explaining in more detail, but the simple explanation is for homeowners insurance to decrease in cost, insurance companies need reinsurance investors to re-enter the home insurance market. This will help reduce home insurance rates, but we do not expect this to happen until the 4th quarter of 2024 for a number of reasons.
What Can You Do to Save Money?
Well, I did a long video on home discounts and recommend you look up that video, but the number one thing you can do to save money in 2024 on your insurance is to work with an insurance agency like mine, Trailstone Insurance Group. We shop your insurance policies with more than 40 insurance companies, finding you the best options and always making sure you have every discount available. We will also discuss strategies to reduce your rates, such as best practices for coverages and deductibles.
Give us a call or click on the link at the end of the video to get started with your quote. You will be thankful you did, and if you don’t believe me, Google us and read our 5-star reviews. We have more than 2100 5-star reviews between all of our locations.
FAQs
Will homeowners insurance rates increase in 2024?
Yes, it is likely that homeowners insurance rates will increase in 2024 due to various factors including weather-related claims, rising construction costs, and reinsurance challenges.
Why are weather-related claims affecting my insurance rates?
Severe weather events, such as wildfires, hurricanes, and floods, have led to increased claims. Insurance companies are spreading these costs across all policyholders, resulting in higher premiums even for those not directly affected.
How do construction costs impact my insurance rates?
Increased costs for building materials and construction labor mean that it is more expensive to repair or rebuild homes. These higher costs are passed on to homeowners through increased insurance premiums.
What is reinsurance and how does it affect my rates?
Reinsurance is insurance for insurance companies, helping them manage risk. When reinsurance costs rise or investors pull back from the market, insurance companies face higher operational costs, which are then passed on to policyholders.
What can I do to reduce my homeowners insurance premiums?
Work with an independent insurance agency like Trailstone Insurance Group to shop around for the best coverage and rates. Ensure you are taking advantage of all available discounts and consider adjusting your coverage and deductibles.
Can Trailstone Insurance Group help me find better rates?
Yes, Trailstone Insurance Group works with over 40 insurance companies to find the best coverage and pricing for your needs. Our team ensures you get the most comprehensive and cost-effective insurance options available.