Have you ever wondered why your home insurance rates just seem to keep going up and up even when you haven’t filed a claim?
We often have people call in for an insurance quote and their reason for shopping their insurance is that their home insurance rates increased substantially from the prior year. Many of these customers mentioned they’ve never filed a claim and didn’t understand why their rates increased.
While there are many different factors that go into determining accurate home insurance rates, we’re going to explain the three main factors that could be the reason for your home insurance rates increasing.
First is risk pooling. Insurance companies take in premium from thousands of customers each year with rates based on projected claims in the hope that the premiums from many will cover the claims of a few. And then a hurricane comes…. and then another hurricane comes…. then another hurricane comes, and these events can increase claim activity beyond the insurance company’s projections. This can result in home insurance rates increasing for everybody – even if you didn’t file a claim.
But don’t insurance company keep reserves for all of those years when we didn’t have any hurricanes?
The answer is yes. Which leads the second factor – investment income. Insurance companies keep what’s called a float and use investment income to offset underwriting losses. With average insurance losses of $21 billion per hurricane, you can see how a series of storms can put a huge dent in reserve capital and cripples the insurance companies’ ability to offset losses with investment income….the net result…rate increases for everyone.
And lastly, to a lesser degree you simply have the increased risk of an aging home. Without question, a 50-year-old home is more susceptible to pipes breaking, electrical fires, roofs leaking, water intrusion, etc when compared to a new construction home. As a home ages, the building materials will degrade. Insurance companies will price for this increased risk year over year and it’s common to see small rate increases year over year as your home ages.
Want to see what insurance rates look like in your area? Get a quote online at shopitnow.chrinco.com or give me a call at 321-586-3754. Chrinco.com – insurance simplified.
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