How to Get More Affordable Home Insurance as Costs Soar (2023)

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Weather-driven disasters are causing rates to skyrocket in high-risk regions. But there are things owners can do to save on costs.

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How to Get More Affordable Home Insurance as Costs Soar (1)

By Tara Siegel Bernard

As the 2018 West Fire swept through Alpine, Calif., a small town in the foothills east of San Diego, firefighters were stationed in front of Emily Ziegler’s house, where she lives with her husband and three children.

The fire claimed dozens of homes in its path, but the family’s house — which includes a garage and a granny flat on more than two acres near Cleveland National Forest — was unscathed.

Securing affordable homeowners’ insurance, however, has become a challenge. The family’s policy with USAA doubled to $8,000 last year, and when Ms. Ziegler called other insurers in search of a better deal, they all gave her the same advice: Hold on tightly to your existing policy.

“There is a limited number of people who will write insurance in our area, and they will only write it for a limited number of homes,” said Ms. Ziegler, 44, a forensic psychologist. “I don’t have any other options.”

Options continue to shrink for homeowners living in California and other catastrophe-prone states, including Louisiana and Florida. Just last month, State Farm, the largest insurer in California, said it would stop writing new homeowners’ policies there, citing the rising cost of rebuilding, increased exposure to catastrophes like wildfires and the escalating expense of the insurance it buys for itself to offload some financial risk. It joined retreats by Allstate, California’s fourth-largest insurer, and AIG last year and Nationwide before that.

“The new normal means paying more attention to insurance than you’d like to or you have been,” said Amy Bach, executive director of United Policyholders, a consumer advocacy group.

Even outside the areas most vulnerable to the increasing frequency and costs of weather-driven disasters, insurance prices are projected to keep climbing: Nationally, premiums rose 12.4 percent in the first quarter, according to S&P Global Market Intelligence, the highest increase in nearly two decades.

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When traditional insurance is hard to secure

Finding a reasonably priced policy is an increasingly complex and high-stakes calculation. Standard homeowners’ and renters’ insurance policies don’t cover all hazards. Wildfires are generally folded in, for example, but floods and earthquakes generally require separate coverage. In hurricane-prone areas, wind and hail coverage may carry its own deductible — or be a separate policy.

In fact, homeowners having difficulty securing policies through traditional, state-regulated carriers like State Farm may need to turn elsewhere, even temporarily.

Most states have some type of “last resort” option, though the plans vary in design, cost and coverage. A majority of states have so-called FAIR plans, an acronym for Fair Access to Insurance Requirements, which are established by the state but generally backed by private insurers. They provide basic coverage — at a higher cost, in part because they take on the riskiest customers — and homeowners may need to buy supplemental policies to fill in gaps.

More Californians are expected to continue to turn to their state’s FAIR plan. And in Florida, the FAIR plan became its largest insurer last year, covering more than 15 percent of homeowners at the end of 2022, according to the Insurance Information Institute, a trade group. Colorado passed legislation last month to create its own version, which will insure homeowners up to $750,000.

There are nontraditional options, but they come with fine print of their own: Specialty insurers sell policies in higher-risk areas that are only lightly regulated, and unlike traditional insurers, they are not backed by state guarantees. In other words, if they fail and cannot pay out claims, the homeowner receives nothing. (An insurer’s financial strength can be found through companies like AM Best.) These carriers also don’t need to submit their rate increases for approval with states, as regulated insurers do.

“People are turning to it because it is there, and they are desperate,” said Douglas Heller, director of insurance at the Consumer Federation of America. “But it is important for consumers to know whether the insurer they are signing up for is protected by the state guarantee fund if the insurer goes insolvent.”

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Mitigating risk and strengthening your home for disasters

After homeowners figure out the hazards in their area — sites like Risk Factor can help — they can take steps to reduce the potential damage and, hopefully, their insurance premium. You might even call your insurer to find out if your property has a risk score, and ask if there are ways to improve it.

In California, a new law requires insurers to provide homeowners with their property’s wildfire risk score when they apply for a policy, and what they can do to lower it. Last year, the Insurance Institute for Business & Home Safety, a research group, introduced the Wildfire Prepared Home designation, which provides a list of actions that can be taken to “harden,” or fortify, a home against wildfires. After those requirements are met, the group sends an inspector and issues a three-year certificate that may be used for potential insurance discounts. The designation costs $150.

“Insurance companies want to see that mitigation actions have been taken, and oftentimes it is a suite of actions, not just one,” said Roy Wright, chief executive of the institute and a former chief executive of the National Flood Insurance Program.

Mitigation measures for hazards in different parts of the country can reduce premiums 5 to 10 percent, according to the Insurance Information Institute.

Ms. Ziegler and her husband, Louie Garcia, are doing what they can to make their home less vulnerable to wildfires. They have a “defensible space” around most of their house, which is clear of vegetation and other flammable materials, and Mr. Garcia is replacing the wood siding with fiber cement board. They’re also rebuilding their wood deck with fire-resistant materials.

Mitigation costs can vary. Replacing a cedar roof with metal, concrete or asphalt may be pricey, but fire-resistant, mesh-covered vents that prevent embers from getting inside the home, for example, can cost just $50 a piece.

All of these actions are more effective when they’re happening communitywide. Living in what the National Fire Protection Association deems a “Firewise USA” community can help generate insurance discounts.

Other cost-saving strategies

Most people are advised to buy enough insurance to rebuild their home so that it meets building code requirements. Be sure the policy covers the replacement value, not the actual cash value. The high cost of rebuilding is driving much of the premium increases, but there are strategies to try to reduce your premiums.

Many homeowners are resorting to the usual tactics, including raising their deductible or reducing coverage on other structures, such as garages, or their home’s contents and personal property.

Some larger carriers offer deductibles up to $5,000, while specialty insurers may run as high as $10,000, said Pat Howard, a home insurance expert at Policygenius. “Right now choosing a high-deductible policy is probably the most impactful thing they can do to lower their bill.”

But it also means you won’t be able to file claims below that amount, which makes an emergency fund even more important. And in the most disaster-prone regions, including the Gulf Coast states and parts of Long Island, deductibles for wind damage are already sky high, so it’s impractical to raise them further.

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How to scour the insurance market

In an online world that’s increasingly eliminating the middleman, this is a situation where a well-seasoned broker can help. “In this market,” Ms. Bach said, “it is very hard for a consumer to shop on their own.”

Some experts suggest scouring the market in a few different ways: Get at least one quote online and one through an agent that sells exclusively through one insurer. Then reach out to an independent broker who has the ability to survey several providers and match you with the best insurer for your situation. Investing time in this exercise every few years (or every year, if you don’t have a traditional policy) can ensure that your coverage is in good shape.

If you’re buying a home, start that search early. In riskier areas, real estate agents are requiring homeowners to find insurance before closing, said Janet Ruiz, an industry expert at the Insurance Information Institute.

Mr. Howard of Policygenius said he’d go as far as building an insurance contingency clause into offers on new homes — that is, if you cannot get insurance or adequate coverage, you can walk away from the deal. “You are going to see that a lot more,” he added.

Tara Siegel Bernard covers personal finance. Before joining The Times in 2008, she was deputy managing editor at FiLife, a personal finance website, and an editor at CNBC. She also worked at Dow Jones and contributed regularly to The Wall Street Journal. @tarasbernard

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FAQs

How to negotiate with homeowners insurance? ›

Work up a settlement amount that you believe you should receive if their first offer isn't reasonable. Don't hesitate to challenge their first offer if you can substantiate that it should be higher. You can prove your point by showing them parts of your policy and providing quotes from reliable contractors.

What is one way to reduce the cost of a homeowners insurance policy? ›

Increase your deductible

A quick way to reduce your premium is to raise your homeowners insurance deductible, the amount you pay if you have to make a claim. If you have a $1,000 deductible, you could save an average of 11% a year by increasing it to $2,500, according to NerdWallet's rate analysis.

Why is homeowners insurance getting so expensive? ›

Insurance experts generally agree that two major forces have pushed insurance premiums skyward. “Broadly, it's inflation and climate change,” says Tim Zawacki, lead insurance analyst at S&P Global.

What are two factors that affect the cost of home insurance? ›

Your home's location, its reconstruction cost, and your credit history are all factors that can affect the cost of your homeowners insurance policy.

What not to say to home insurance adjuster? ›

That means knowing what not to say during a conversation with an insurance adjuster.
  • Never Admit Fault. ...
  • Don't Answer Questions About the Incident. ...
  • Don't Give Information about Your Physical or Emotional Condition. ...
  • Don't Accept the Initial Settlement Offer. ...
  • Contact a Florida Car Accident Attorney Today.
Dec 13, 2022

What is the 80% rule in homeowners insurance? ›

The 80% rule dictates that homeowners must have replacement cost coverage worth at least 80% of their home's total replacement cost to receive full coverage from their insurance company.

What 4 key factors influence the cost of your property insurance? ›

Here's a rundown of 10 factors that could impact your home insurance costs.
  • Your Location. ...
  • The Size of Your Home. ...
  • The Condition of Your Home. ...
  • If You Own or Finance Your Home. ...
  • Your Level of Coverage. ...
  • Your Deductible. ...
  • Previous Homeowners Insurance Claims. ...
  • The Cost of Materials and Construction.
Jan 13, 2023

What is the most important part of homeowners insurance? ›

The most important part of homeowners insurance is the level of coverage. Avoid paying for more than you need. Here are the most common levels of coverage: HO-2 – Broad policy that protects against 16 perils that are named in the policy.

Is homeowners insurance going up in 2023? ›

Homeowners can expect to see their premiums increase by an average of 7.1% in 2023, according to S&P Global Market Intelligence. Of course, homeowners insurance rates haven't increased in even measure throughout the country in early 2023.

What is the best homeowners insurance? ›

Compare the Best Homeowners Insurance Companies
ProviderWhy We Picked ItOur Rating
AllstateOur Pick for Extended Coverage4.45 out of 5
American FamilyOur Pick for Helpful Online Resources3.98 out of 5
State FarmOur Pick for New Homeowners4.45 out of 5
NationwideOur Pick for Inclusive Standard Coverage4.55 out of 5
7 more rows
Jun 16, 2023

Which homeowners insurance is the most expensive? ›

Travelers is the most expensive homeowners insurance company for $200,000 and $350,000 dwelling amounts. Shelter is the most expensive home insurer for the $500,000 and $750,000 dwelling coverage amounts. Rates vary significantly among companies because they each have their own formulas for pricing.

What are 3 things that could make home insurance go up? ›

Why Homeowners Insurance Rates Go Up
  • 1: Filing Claims May Mean Higher Premiums. ...
  • 2: Property Changes & Attractive Nuisances. ...
  • 3: Inflation Strikes Again. ...
  • 4: Construction Costs in Your Area Affect Your Rebuild Cost. ...
  • 5: Your Insurance Score Dropped.

What five 5 factors play a role in the cost of home insurance? ›

Factors affecting home insurance costs
  • Weather. Florida and Texas have the highest home insurance premiums due in no small part to the likelihood of catastrophic weather events. ...
  • Population. ...
  • Neighborhood. ...
  • Proximity to risk factors. ...
  • Personal factors. ...
  • Credit. ...
  • Personal belongings. ...
  • Home-related factors.
Mar 21, 2018

What are 5 factors that are used to determine the cost of insurance premiums? ›

Some factors that may affect your auto insurance premiums are your car, your driving habits, demographic factors and the coverages, limits and deductibles you choose. These factors may include things such as your age, anti-theft features in your car and your driving record.

What not to say to insurance? ›

Some key phrases to avoid saying to an insurance adjuster include: “I'm sorry.” “It was all/partly my fault.” “I did not see the other person/driver.”

How do you negotiate with an insurance adjuster? ›

Tips for Negotiating With an Insurance Claims Adjuster
  1. Come well-prepared with supporting evidence. Records and documentation are critical components of the process. ...
  2. Calculate a full settlement amount. ...
  3. Know your bottom line. ...
  4. Beware of the first offer. ...
  5. Get the settlement offer in writing. ...
  6. Read the fine print.
Feb 17, 2023

How can I avoid paying my home insurance deductible? ›

File Claims Wisely

You can also avoid paying deductibles by only filing a claim when you have to. Not only do claims increase your premium, if you file lots of them, insurance companies will classify you as a "high-risk" homeowner and you'll be given high rates by default.

What percentage should home insurance be? ›

What Is the 80% Rule for Home Insurance? The 80% rule is adhered to by most insurance companies. According to the standard, an insurer will only cover the cost of damage to a house or property if the homeowner has purchased insurance coverage equal to at least 80% of the house's total replacement value.

How many quotes should I get for homeowners insurance? ›

Whether you're working with an agent or on your own, plan to get at least three quotes. That way, you can feel confident you're getting a good price. When comparing quotes, check that each policy has similar deductibles and coverage limits.

What is the formula to calculate homeowners insurance? ›

The rule of thumb for estimating homeowners insurance is figuring out the value of your home, dividing that number by 1,000, then multiplying the answer by $3.50 to get the average cost of home insurance per month. You can then multiply that answer by 12 to get the average annual cost of a homeowners insurance policy.

How do you dramatically cut costs? ›

How To Cut Your Expenses
  1. Keep Track of Your Spending Habits. If you've ever had a toddler in the house, you know how they can disappear if you aren't keeping a close eye on them. ...
  2. Create a Budget. ...
  3. Update Subscriptions. ...
  4. Save on Utility Costs. ...
  5. Cheaper Housing Options. ...
  6. Consolidate Debts. ...
  7. Shop for Cheaper Insurance. ...
  8. Eat at Home.
Feb 10, 2023

How can I save money on my insurance premiums? ›

Auto Insurance
  1. Shop around for your car insurance.
  2. Compare insurance costs before you buy a car.
  3. Raise your deductible.
  4. Reduce optional insurance on your older car.
  5. Bundle your insurance and/or stick with the same company.
  6. Maintain a good credit history.
  7. Take advantage of low mileage discounts.
  8. Ask about group insurance.

What are 6 factors that influence the cost of insurance you will pay? ›

What factors are most important for car insurance rates?
  • Age. Age is a very significant rating factor, especially for young drivers. ...
  • Driving history. This rating factor is straightforward. ...
  • Credit score. ...
  • Years of driving experience. ...
  • Location. ...
  • Gender. ...
  • Insurance history. ...
  • Annual mileage.

What are 4 or more factors that will increase your homeowners insurance premiums? ›

Your credit history. Additional types of coverage. Your deductible. Bundling other insurance from the same company.

Will a brick house tend to have a lower homeowners insurance premium? ›

Are Brick Homes Cheaper to Insure? Because brick and masonry homes are more resistant to fire and wind damage than frame houses are, brick houses tend to be cheaper to get insurance coverage for.

What are home insurance premiums based on? ›

Some are personal factors, like your age, credit-based insurance score, marital status and claims history. Other factors are related to your home, like the ZIP code, year it was built, square footage, general condition and your property's proximity to a fire station.

What are 2 things not covered in homeowners insurance? ›

Termites and insect damage, bird or rodent damage, rust, rot, mold, and general wear and tear are not covered. Damage caused by smog or smoke from industrial or agricultural operations is also not covered. If something is poorly made or has a hidden defect, this is generally excluded and won't be covered.

What is the most common form of home insurance? ›

The HO-3, also known as a "special form," is the most common homeowners insurance policy form, says the National Association of Insurance Commissioners. An HO-3 offers "open peril" coverage for the structure of your home.

Which area is not protected by most homeowners insurance? ›

5 Things That Are Not Covered by a Standard Homeowners Insurance Policy
  • Floods.
  • Earthquakes.
  • Home businesses.
  • Everyday wear and tear.
  • Home neglect.
Jan 5, 2023

Why did my homeowners insurance double in 2023? ›

The increase is caused by inflation, but some say climate change could also affect your rates. When you get your home insurance premiums for 2023, you could be in for sticker shock.

Why did State Farm home insurance go up? ›

Insurance company State Farm has asked to hike rates on homeowners by an average of 28.1% in response to wildfire risks and skyrocketing construction costs, according to the California Department of Insurance, which is charged with evaluating rate increase requests.

How much will insurance increase in 2023? ›

Car insurance costs are on the rise in 2023. According to personal finance website ValuePenguin, insurance rates across the US are expected to rise by 8.4%, bringing the total average premium for full coverage to $1,780 per year.

Which insurance company has the highest customer satisfaction? ›

Best for customer satisfaction: State Farm

The largest personal auto insurer in the country, State Farm ranked No. 1 among eight large insurers in J.D. Power's 2022 U.S. Insurance Shopping Study. J.D. Power. 2022 U.S. Insurance Shopping Study. Accessed Dec 19, 2022.

What are the three types of homeowners insurance? ›

Homeowners insurance policies generally cover destruction and damage to a residence's interior and exterior, the loss or theft of possessions, and personal liability for harm to others. Three basic levels of coverage exist: actual cash value, replacement cost, and extended replacement cost/value.

Which insurance company is best? ›

Best Life Insurance Companies in India
  • Max Life Insurance Company.
  • AEGON Life Insurance Company.
  • Bharti AXA Life Insurance Company.
  • Bajaj Allianz Life Insurance Company.
  • HDFC Life Insurance Company.
  • Life Insurance Company (LIC)
  • Pramerica Life Insurance Company.
  • Exide Life Insurance Company.
Jun 21, 2023

Which state has the most expensive homeowners insurance? ›

10 Most Expensive States for Homeowners Insurance
#StateAverage Rate (for $300-399k insurance)
1Oklahoma$2,493
2Florida$2,332
3Louisiana$2,260
4Texas$2,121
6 more rows
May 8, 2023

What is the most expensive insurance ever? ›

The Guinness record holder: The most valuable life insurance policy ever sold, according to Guinness World Records, is valued at a total of $201 million, on the life of a well-known U.S. billionaire who resides in the Silicon Valley area of California and is actively known in the technology space.

Is it better to have actual cash value or replacement cost? ›

Overall, replacement cost is a far better form of coverage than actual cash value. An RCV policy will help replace damaged or stolen property with new items. Actual cash value coverage will only cover the depreciated amount, which means you'll have to pay more out of pocket to replace everything.

Can you negotiate home insurance rates? ›

Is homeowners insurance negotiable? You cannot negotiate your homeowners insurance quote, but you can lower the amount you pay by taking a variety of steps—maintaining a good credit score, paying in full, installing protective devices, researching discounts, and more.

What causes high home insurance? ›

Several factors are behind the rising rates. Severe weather events continue to cause serious damage and costly insurance claims. The rising cost of building materials, supply chain issues and unfilled jobs are driving up the costs of home repairs.

What are the 4 factors affecting home insurance cost? ›

Here's a rundown of 10 factors that could impact your home insurance costs.
  • Your Location. ...
  • The Size of Your Home. ...
  • The Condition of Your Home. ...
  • If You Own or Finance Your Home. ...
  • Your Level of Coverage. ...
  • Your Deductible. ...
  • Previous Homeowners Insurance Claims. ...
  • The Cost of Materials and Construction.
Jan 13, 2023

What are the 5 C's in insurance? ›

The 5Cs of transformation in insurance are – communication, customization, connection, cognition and consensus.

Is house insurance cheaper without a mortgage? ›

No, house insurance isn't any cheaper without a mortgage. Your home still has the same risks as it had while you were paying off your mortgage. You're no longer required to have a policy without a lender, but very few people recommend dropping homeowners insurance after you pay off your mortgage.

What factors affect insurance premiums the most? ›

Common factors include:
  • Driving record. ...
  • Garaging of the vehicle. ...
  • Gender and age of drivers. ...
  • Marital status. ...
  • Prior insurance coverage. ...
  • Miles driven and use of vehicle. ...
  • Make and Model of vehicle. ...
  • Licensed drivers in your household.

What are the 4 major elements of insurance premium? ›

These elements are a definable risk, a fortuitous event, an insurable interest, risk shifting, and risk distribution.

What is the most common risk factor when determining the cost of insurance? ›

Age is the most important factor in determining your premium cost. The younger you are, the lower your payments.

Do insurance companies try to lowball? ›

But too often, insurance companies try to lowball you when offering their settlement. They make the assumption that most people don't understand the true value of their claim, need the money quickly or are poor negotiators.

How do I make a counter offer on an insurance settlement? ›

Your legal representative can help you write a letter that states your intentions. Within the letter, you can indicate that you reject the offer and highlight why you deserve a higher settlement amount. You should also counter their reasons for providing you with the low-ball initial offer.

What questions should I ask my home insurance adjuster? ›

  • How much coverage did you quote on my house? ...
  • How much coverage is provided for my personal property (my stuff)?
  • Are my contents insured for replacement cost or actual cash value (ACV)
  • Is my house insured for replacement cost or actual cash value (ACV)
  • Do I have sewer and water coverage?

Can you bargain with insurance companies? ›

If the insurance company responds to your demand letter with a reasonable offer, you can counter with an amount that is lower than what you demanded. By doing so, you can show the adjuster your willingness to compromise.

What is the best way to politely reject an insurance offer? ›

Specifically, your response should always include the following three things:
  1. A clear statement that you reject the settlement offer that you received;
  2. A list of specific reasons why that explain why the offer is too low; and.
  3. A demand for a better offer.

What are at least four things that influence the rate you pay for insurance? ›

Some factors that may affect your auto insurance premiums are your car, your driving habits, demographic factors and the coverages, limits and deductibles you choose.

Why do insurance companies give low first estimate? ›

The Insurance Company Offers a Lowball Offer Because They Did Not Perform a Detailed Investigation. The insurance company will often perform its own investigation into the accident and account for the evidence you provide them before issuing a settlement offer.

How much is too much for a counter-offer? ›

Start with a figure that's no more than 10-20% above their initial offer. Remember, you're applying for entry level, and you shouldn't expect something on the higher range. Consider negotiating lower if 10-20% places you above the average.

How much is a reasonable counter-offer? ›

If you wait to negotiate until you get the offer, a “reasonable” counteroffer usually means $5,000-10,000, or 5-10% more than the company offers. When an offer is around that range but lower than what you're looking for, this is a good time to negotiate.

How do you win a counter-offer? ›

How To Negotiate a Counteroffer
  1. Know your value and the industry rate for your position. ...
  2. Don't rush it. ...
  3. Don't forget non-salary benefits. ...
  4. Don't push too hard. ...
  5. Don't say too much. ...
  6. Know what's really important to you. ...
  7. Use a template to frame your request.
Dec 3, 2022

What not to say when talking to insurance adjuster? ›

Some key phrases to avoid saying to an insurance adjuster include: “I'm sorry.” “It was all/partly my fault.” “I did not see the other person/driver.”

What questions should I ask an insurance company? ›

Start a conversation: 8 questions to ask your insurance agent.
  • What is my deductible? ...
  • What is my premium? ...
  • What happens if I get in a car accident? ...
  • Does my homeowners insurance policy offer enough protection? ...
  • Is it time for me to consider life insurance? ...
  • Do I have enough liability coverage? ...
  • Do I need an umbrella policy?
Jan 6, 2021

What questions should I ask a public adjuster? ›

10 Questions to Ask Before Hiring a Public Adjuster
  • What types of claims are handled? ...
  • Is the company licensed within the state? ...
  • How long has the company been in business? ...
  • Ask that the adjuster provide industry references. ...
  • How are business interruption claims addressed? ...
  • How many claims are currently being handled?

How do I ask my insurance for more money? ›

Send a Detailed Demand Letter to the Insurance Company

Because the insurance company will likely reply with an offer for an amount lower than what you've asked for in the demand letter, you should ask for between 25 and 100 percent more than what you would be willing to settle for.

Why are the insurance company trying to lowball me? ›

Insurance adjusters usually propose a lowball offer because their companies don't want to pay more money than they have to, and they think they can get away with it if the claimants don't have experience negotiating these types of claims.

Do insurance companies set prices? ›

The prices paid by commercial insurers are determined through confidential negotiations between individual insurers and individual providers or groups of providers.

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