We’ve all been there: you open your insurance company’s latest annual assessment, and lo and behold, your home insurance premium has increased. You may wonder why this premium seems to rise every year; after all, your home has stayed the same, hasn’t it? The truth is that many factors influence the cost of home insurance each year, and while the age and condition of your home are considered in your premium, most factors are out of your direct control.
Rising Cost of Doing Business Each Year
With factors like inflation and rising fuel costs increasing the cost of doing business, insurance companies seek to cover their costs by increasing rates. On top of that, there are other factors for them to consider, such as changing neighbourhood trends that affect risk levels, aging municipal infrastructure that can cause damage to your home, and new eco-friendly build options that cost more to install and to replace.
Increasing Costs of Construction
The cost of construction has risen dramatically. Material costs have increased, which includes everything from building supplies like lumber, concrete, and asphalt, to home essentials such as cabinetry and electrical and plumbing fixtures. The cost of services and labour has also increased. Overall, this means that the repair or replacement cost of your home has gone up, and your insurance company is on the hook for these increased costs. In response, they will raise their rates to cover these claims.
Large-Scale Natural Disasters
Large-scale natural disasters, like hurricane Fiona or wildfires, cause mass destruction—sometimes of entire municipalities. Every one of those insured homes needs to be replaced, and the rebuild costs quickly become so high that it depletes the reserves of the insurance companies involved. As a result, other policyholders will see their rates increase.
Rate of Inflation
Unfortunately, home insurance rates are increasing everywhere due to the record-high inflation that we’re experiencing. As costs for everything go up, so does the amount of coverage you need, since it simply costs more to repair or replace your home in the event of damage or destruction. Without appropriate increases, you may find that your coverage doesn’t cover your repair or replacement costs the way that it used to, and insurance companies take this into account when adjusting their rates.
Negotiate a Fair Rate with Douglas Cost Guide
While many of the reasons that your premium increases are not within your control, you can take charge by using Douglas Residential Cost Guide to ensure that you’re getting a fair rate. Douglas Cost Guide is an industry-standard manual for replacement cost estimates, and you can use your calculated rate to negotiate with your insurer and make sure that you’re only paying for what you need. Subscribe today or book a free consultation to get detailed answers to your questions from our friendly, knowledgeable staff!