Does Homeowners Insurance Go Up Every Year? – Things To Know
Homeowners insurance is paid on an annual basis and usually through an escrow account. Lenders using an escrow account roll your homeowners insurance premium into your monthly mortgage payment. Does Homeowners Insurance Go Up Every Year? When your homeowners insurance increases, so does your mortgage payment. Whether your insurance increases each year depends on several factors that vary by person and property. Those variables may include changes to your credit score or just inflation.
Purchasing a home can provide benefits to the owner, but the investment must be protected with homeowner’s insurance. The premiums of this necessary insurance coverage, like the property taxes charged by your local community, are expenses that will continue as long as you own the structure. While there are not many actions you can take to reduce your tax obligation, there are ways to lower the premium you pay for homeowners insurance.
Does Homeowners Insurance Go Up Every Year?
Reasons Behind Rising Costs
In most cases, both your annual property tax and your yearly insurance coverage will increase each year. Taxing authorities do this to provide for and improve things like roads, sewage systems, libraries, and schools. Insurance providers raise the cost of coverage to keep up with the increasing cost to repair or replace your home—due to inflation.
The age of your home will also affect the price of your coverage. Older homes have a greater need for repair and maintenance. The absence of security and safety features like lights and smoke detectors can impact your premium. Also, any claims you filed may increase the cost of your coverage as your insurance risk profile changes. Even if you did not file a claim, if you live in an area where the insurer had to pay for damages received by others, the company may raise their rates to all homeowners.
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Whether your insurance increases each year depends on several factors that vary by person and property.
Insurance companies use your credit rating to determine your premium. The logic behind credit-based insurance is that the homeowner with a higher credit score takes better care of the property and is more likely to pay the premium on time. When your credit rating decreases, your homeowners insurance may increase. Your insurance agent must send you a notice of adverse action stating the reason your homeowners premium is increasing and the credit reporting bureau he used to make that determination.
Personal lifestyle choices could increase your homeowners insurance premium. Entertainment items such as a swimming pool, play sets and trampolines increase your premium because of the increased likelihood of injury. The types of pets you have, such as dogs, may increase your coverage. Insurance companies may refuse to insure animals it feels are high-risk, such as pit bulls, dobermans and rottweilers. Making any of these changes to the property during the year could increase your premium next year.
Making a claim against your insurance policy increases your chance of a higher premium. According to Bankrate, filing one claim does not increase your insurance premium but filing multiple claims within a three-year period increases your premium because you are perceived to be a higher risk. Each insurance company is different and maintains its own criteria for increasing your premium. Keeping your insurance premium low means minimizing the amount of claims you file on your insurance.
When inflation goes up, the cost of your insurance goes with it. Insurance companies have to increase the amount of money customers pay to keep up with rising costs. You may notice an increase in your homeowners insurance each year simply because of inflation and the higher costs of doing business. Insurance companies use the Consumer Price Index to as an indicator for inflation. When the CPI rises, insurance companies raise the premiums to match.
When you receive your annual bill, you get the definitive word on whether your insurance rates increase for the year. There are a few variables that actually could lower your insurance premium, such as the length of time you’ve been insured with the company. Certain insurance companies give discounts to long-time customers. Also, the homeowner who bundles his insurance — car and home — may get an additional discount.
Lowering Your Bill
If your rate increased and you need to lower it, consider increasing your deductible. Higher deductibles cost less in insurance costs, but you pay more out of pocket. You also might consider lowering your coverage levels. You put yourself at risk to pay more, but you pay less each year in insurance. Just make sure you keep enough coverage to satisfy your mortgage lender and satisfy your deed of trust.