Placing the welcome mat in front of a brand-new home is an amazing milestone! On top of mortgage and property tax costs, homeowner’s insurance is another expense to be prepared for. We know here at the Alexander Insurance Agency of St. Charles that many of you out there have struggled immensely with rising costs over the past few years! The average annual cost for homeowner’s insurance in the U.S. is just under $3,000. Your home insurance rate varies based on risk factors related to you and your property.

Homeowners Insurance Costs by State:

Local risk factors significantly influence the average cost of home insurance in different states. State home insurance costs vary widely due to factors like crime rates, extreme weather, and cost of living differences. State premiums range from as low as $750 to as high as $6,500 annually. The average annual cost for homeowner’s insurance in Missouri is around $3,500.

From Location to Lifestyle: Elements That Shape Your Home Insurance Costs

Your state, city, and even your neighborhood play a significant role in shaping your home insurance premium. However, location is merely one piece of the puzzle. Insurers evaluate a multitude of factors to gauge your overall risk. Let’s delve into the key elements that influence your insurance rates.

Claims History:

Your policy covers most damages, but filing a claim may lead to higher rates upon renewal. Even if you switch insurers, most companies will examine your claims history from the past five to seven years.

If you’ve filed a claim within that period, you’re likely to face increased premiums. Wind and Hail claims tend to be around $2,900. Fire and Lightning damage runs around $3,400. Water damage and freezing usually cost around $3,300.

Credit Score:

Just like your claims history, your creditworthiness also influences your home insurance premiums. In many states, insurers can review your credit-based insurance score—a measure derived from your credit score that helps gauge your risk of filing claims.

While regulations in most states ensure this score isn’t the primary reason for denying coverage, it still plays a role in setting your premium. Each insurer interprets credit history uniquely, making it a key piece of the puzzle in determining your rates. A client with poor credit can expect to pay over $9,000 for their premium, while those with excellent credit may enjoy rates as low as $2,000 annually.

Risks:

Struggling to secure home insurance? Your property might be deemed high-risk by many insurers. Companies evaluate numerous aspects of both the home and the homeowner to assess risk. If any of the following characteristics apply to you, your home might fall into the high-risk category.

• Location: Living in an area prone to property crime or natural disasters, like floods or hurricanes, raises red flags. States like California also face higher risks due to earthquakes.
• Condition: Homes with structural issues or those in disrepair signal trouble to insurers.
• High-Risk Features: Properties boasting a swimming pool, trampoline, or similar risky amenities often face higher premiums or coverage denial. These “attractive nuisances” lure curious children who might get injured.
• Age: Historical homes with antique architectural elements or roofs over 20 years old are viewed as higher risk by insurers.
• Vacancy: Homes that are seldom occupied are more vulnerable to property crime and undetected issues like burst pipes, making them high-risk in the eyes of insurers.

The Homeowner

• Aggressive Pets: If your furry friend tends to bite or has an aggressive streak, it raises your risk profile. Some insurers won’t cover breeds labeled as aggressive, like pit bulls, no matter their temperament. Others will look at the specific bite history of any dog, breed aside.
• Excessive Claims History: Filing a claim bumps up your premiums, but multiple claims in a short period can lead to non-renewal and difficulty finding a new insurer.
• Home-Based Businesses: Running a business from home? High-value equipment may increase your risk and require a separate policy or endorsement for coverage with insurers.
• Low Credit Score: In many states, elements of your credit history are factored into your risk assessment by insurers.

Age of the Dwelling

As homes age, they accumulate wear and tear on their structure, foundation, plumbing, electrical systems, and more. These aging components often lead to issues not commonly found in newer properties. Repairing and updating outdated systems to meet current building codes can be both complex and costly. Insurance companies view older homes as a higher risk for claims, which typically results in higher premiums.

Additionally, the age of your roof plays a crucial role. The roof is your home’s first defense against severe weather like high winds, a newer roof will generally attract lower insurance premiums compared to an older one. A customer can expect to pay a premium of around $1,700 for a home under one year old, while a 50-year-old dwelling may cost around $3,200.

Insurance Deductible

Every home insurance policy comes with a deductible—the amount you must cover out of pocket before your insurance starts paying for covered losses. Opting for a higher deductible shifts more risk to you, leading to lower premiums but higher costs if damage occurs. A lower deductible boosts your monthly premium but offers greater financial protection when you need to make a claim. Balancing these choices involves weighing potential savings against your readiness to handle out-of-pocket expenses.

How Inflation Is Shaping Home Insurance Costs

Inflation plays a pivotal role in driving up home insurance premiums, primarily because it raises the cost of repairing or replacing your home after damage. As construction materials and labor prices surge during inflationary periods, the expenses to fix home damage inevitably climb. According to the Insurance Information Institute, insurers adjust premiums to maintain a sufficient “policyholder surplus,” the reserve funds needed to cover potential claims.

Yet, inflation isn’t the only factor behind rising premiums. Coastal homeowners face higher insurance costs due to their increased vulnerability to natural disasters. The combined effects of inflation and more frequent extreme weather events have led insurers to significantly hike premiums in these high-risk areas.

The situation is further strained by insurers withdrawing from these risky regions. For instance, Farmers Insurance ceased offering home coverage in Florida in July 2023 to mitigate its risk exposure. With fewer insurers in these markets, competition diminishes, driving up demand and, consequently, premiums.

How to Save Money on Homeowners’ Insurance:

Although you might not have much sway over factors like your home’s location or age, there are savvy strategies to trim your home insurance premiums. By adjusting elements like your deductible and liability limits, and maintaining a thorough inventory of your possessions, you can achieve significant savings each year. These tweaks can keep you protected from unexpected financial setbacks while still ensuring you’re covered for unforeseen events.

Looking to keep more cash in your pocket while protecting your home? Here are some savvy tips to help you save on your homeowners’ insurance:

• Bundle Up for Big Savings: Why not combine your home insurance with another policy, like car insurance, from the same provider? Bundling can shave off 5% to 25% of your premiums. If you’re already insured with a provider for your car, consider adding your home insurance to the mix for a sweet discount.
• Seek Out Discounts: Providers often offer a range of discounts. Some are easy to snag, such as installing a security system or setting up automatic payments. Others, like having a brand-new home, might be a bit trickier to qualify for but you could still earn savings.
• Invest in Renovations: It might be a splurge upfront, but updating your home can make it a lower risk for insurers, leading to reduced premiums. On the flip side, an older roof or outdated systems could push your costs up, so think about making those upgrades.
• Boost Your Credit Score: While you might not have time to improve your credit score while shopping for insurance, maintaining a good score over time can lead to discounts on your premiums come renewal time.
• Be Wary of Small Claims: Even minor claims can drive up your premiums at renewal. If the cost of repair or replacement is less than your deductible, or if you’ve made recent claims, it might be wise to weigh whether reporting the claim is worth the potential increase in cost.
• Shop Around: Not all insurers assess risk in the same way. Before purchasing a policy or if you’re looking to cut costs, gather quotes from multiple providers. Compare prices, coverage options, customer reviews, and third-party ratings to find the best fit for your needs.

We are looking forward to the back-to-school season and flurry of pre-fall activity here at the Alexander Insurance Agency of St. Charles! These times are when it is so rewarding to enjoy the company of guests and take advantage of all your amenities. Our seasoned experts understand the ever-changing landscape of homeowners insurance, and we’re here to help you find the perfect policy that fits your lifestyle and budget. Whether you’re dealing with rising costs or unique risks, we’ve got the experience and dedication to tailor coverage for you.

Why wait? Take control of your home’s security today. Reach out to us for a personalized consultation and discover innovative solutions that keep your home—and your wallet—safe. With Alexander Insurance by your side, you can enjoy peace of mind knowing your biggest asset is in the best hands.