By Patricia Jones, Alliance Community Task Force: Creating Opportunity
Did that last homeowner's insurance bill make you gasp? Why have our rates gone up so much in the last few years? There are two major reasons: climate change and inflation.
Look at how crazy the weather has been this spring. Tornados, hail, and flooding have occurred throughout Nebraska. We also have large areas still experiencing drought, and therefore prone to fires. Box Butte County has always been windy, but not like this! All of these weather events lead to property damage and increased insurance claims.
It is worse in other parts of our country. NOAA forecasters are predicting an 85% likelihood of more hurricanes this summer, "abnormally busy... with storms primed for rapid intensification." Some areas are rated higher for forest fires or mudslides. Because of tornados, Oklahoma has the highest rates in the nation. Some insurance companies will not provide coverage in specific states because of the weather risks. Flooding is the most frequent and expensive natural disaster in the United States, and most homeowner's insurance does not cover it.
Along with weather disasters, construction prices have gone up tremendously. These prices are based on building materials and labor costs. Lumber prices surged during Covid and are still fairly high. Construction companies have long relied on seasonal labor from our neighbors south of the border. Immigration restrictions have meant that labor is much harder to find, so wages have gone way up. Our insurance rates are based on replacement costs, which may be double the market value of our homes.
Insurance companies will evaluate several things when they set your premium rates. The first is location. Do you live in an area that has a higher likelihood of severe weather? What is the crime rate? How far are you from a fire station or a hydrant? Are building materials more expensive in that region?
The age and condition of your home affect your rates. Think about your roof. What materials were used? How expensive are they? How likely are they to be damaged by a hailstorm? An older roof is more likely to need replacement.
What coverages and limits are you choosing? Dwelling coverage protects your house. Personal property protects your belongings like furniture, clothing, art. Liability pays if someone is injured on your property. This might include things like falling or being bitten by your dog. Limits are the maximum the insurance company will pay.
Your deductible is how much you pay out of pocket before the insurance company pays anything. A higher deductible means lower insurance rates.
What is your claims history? If you've made several insurance claims in the past, you are a high risk and the insurance company will charge you more.
Most insurance companies look at your credit score. This indicates whether you manage your money well and pay your bills on time. People with excellent credit often pay much less for their coverage.
Do you qualify for any discounts? You might get a discount for a home security system. Maybe you can get a discount for making a single payment for the whole year or by enrolling in automatic bank deductions. Some companies give deductions for seniors, or for members of the military, or for veterans. Most companies will give a discount if you bundle with other types of insurance, like auto.
How can you lower your rates? There isn't much you can do because of the weather disruptions created by climate change. Maybe you can keep your trees trimmed and keep brush away from your house.
A better idea is to follow the financial strategies of shopping around to get quotes from several companies. Bundle your home and auto policies. Check your credit record and see if there is anything you can fix. Raise your deductible - and keep that deductible amount in a savings account so you have it if you need it.
Homeowners insurance protects our homes and personal property from unexpected damage or loss. It can help rebuild a home if it's damaged or destroyed by a disaster or other event. It can also protect from lawsuits. Very few of us have the kind of money we would need to pay for these losses without insurance. Insurance is expensive, but it is something all homeowners need.