It’s no secret that the insurance industry has been changing on a massive scale over the last 3 years since the COVID-19 pandemic. If you’re someone with insurance of any kind, you may have noticed increased costs and changes to coverage. Last month, The Wall Street Journal published an article explaining this phenomenon. And if you don’t have a WSJ subscription, we’ve summarized it below. Happy to oblige!
Modern Home Insurance Explained
Home insurers are increasing premiums by double-digits in 31 states due to severe weather events, natural disasters, inflation, and supply-chain snafus. The trend of higher-cost, lower-coverage policies extends beyond Florida, California, and other states prone to hurricanes, floods, or wildfires. Like our home state of Virginia.
Insurance companies are tightening coverage restrictions and managing their terms and conditions as a result. A common example is limiting coverage for older roofs to their cash value, rather than their replacement cost. Many big insurers have stopped writing new home policies in select states altogether.
The map below shows states that have experienced significant rate increases since January 2022, according to an analysis by S&P Global Market Intelligence for The Wall Street Journal. Arizona, Texas, North Carolina, Oregon, Illinois, and Utah had the biggest total of approved increases, ranging from 20% to 30%.
Home insurance rate increases approved since January 2022
The bottom line is this: the escalating cost of catastrophes is reflected in a steep increase in premiums for homeowners. The climate is a huge risk for these insurance companies. That is why there has been an overall price increase in the insurance industry.
One positive development is a slowdown in the increase of repair and replacement costs. According to insurance analytics firm, Verisk, total reconstruction costs, including labor and materials, are only up 1.6% so far this year, compared with rises of more than 7% in the last three years. And with this information, we see some light!
In case you didn’t know- Prosper partners with over 30 different insurance providers and helps individuals make educated decisions about their home insurance needs. So if you’re feeling like your home insurance policy is no longer fitting the bill (literally and figuratively), contact Prosper and we’ll search for the best rate and coverage available to fit you and your family’s needs.
