If you’re worried about increases in your home insurance rates, you’re not alone. According to the most recent data made available by the NAIC, home insurance premiums rose 3.1% in 20181. That trend looks to continue in 2022.
A number of factors go into insurance companies’ decisions to increase home insurance rates. Typical forces that encourage these higher home insurance premiums include the number of claims, increased costs of doing business and overhead.
One new factor that’s impacting insurance premiums? Supply chain delay issues plaguing the economy. Let’s look at how—and why—current supply chain problems could lead to increased insurance costs for you in 2022 and beyond.
4 Ways Recent Events May Impact Your Insurance Policies
1. Building material shortages may impact premiums.
Production of building materials was impacted by the COVID-19 pandemic, and we saw increases in the costs of lumber, steel, concrete, copper, plumbing and even electrical materials. Shortages, like lumber shortages, have occurred as a result of overseas manufacturing slowing or remaining at a standstill, often due to local regulations or a reduction in capacity.
Because supplies may be difficult to obtain, their prices increase and the cost for insurance companies to deal with full replacement value claims is impacted. As claims get more expensive to process, premiums must typically increase to keep up with the demand.
If you’re looking for ways to head off future claims, preemptively dealing with potential issues is key. Proper maintenance and upkeep can help you avoid costly damage in the future, especially for issues such as plumbing and electrical failure.
2. The Rise of More Frequent, Expensive Disasters
As more frequent, expensive storms and other disasters batter the country, more and more home insurance claims are filed in the aftermath of hail damage, wind damage, storm damage, earthquakes and wildfires. This increase in damage will ultimately lead to more home insurance claims.
You may still feel a financial impact even if you haven’t experienced one of these disasters. Living in flood or fire-prone areas of the country may open you up to potential premium increases as insurance companies continue to weigh the risks of coverage.
3. Increased Labor Costs
As if supply shortages weren’t enough to cause price increases, labor costs are also on the rise. The inability of construction firms to find skilled labor or contractors could make for costly delays in repairs or replacement, making it difficult to settle your claim.
4. Supply chain issues may impact effectiveness of coverage.
There’s another side effect to increased costs that might impact not just the price of your insurance premiums, but the effectiveness of your policy to help pay for repairs. As supplies are more difficult to acquire and labor becomes more expensive, certain types of insurance policies may no longer cover as much as they used to. Actual cash value policies that factor in depreciation could fail to pay for repairs in full, or they might end up paying for less than what you originally had.
Full replacement value policies are generally better insulated from this issue, but rising costs will still have an outsized influence on insurance premiums as claims continue to grow. Simply put: the more expensive it is to settle home insurance claims, the bigger the premium increases may be in the future.
SelectQuote Can Help You Compare Rates and Shop for Affordable Coverage
Home insurance premium increases aren’t uncommon. But there’s a solution if you find that they’re outpacing your budget.
SelectQuote can help streamline the process by comparing rates and discounts from several insurance companies at once. When we shop for your home insurance coverage, we can help you find lower rates from some of the most trusted insurance carriers.