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Why Homeowners Insurance Rates Are Going Through the Roof

Soaring premiums are another source of inflation for retirees

spinner image inflation balloon lifting up property insurance umbrella from house while it's raining
Getty Images / AARP

Inflation is striking homeowners insurance, but if you’re tempted to cut costs by reducing coverage — or, if your mortgage is paid off, even dropping it — think again. A single bad storm could make deep and unwelcome changes to your retirement. Instead, consider shopping around for a new policy, and make sure you take advantage of all the discounts available to you.

The average premium for homeowners insurance rose 12.1 percent from May 2021 to May 2022, according to Policygenius; the average annual increase was $134. Although there’s some evidence that inflation in homeowners insurance is easing in 2023 — calculates the increase from 2022 to 2023 at just 3 percent — inflation in all things tends to be cumulative: A 12 percent raise one year followed by a 3 percent raise is still a 15 percent hike over two years.

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Why homeowners insurance rates are rising

Inflation in all its forms has been a driving force behind rising homeowners premiums, says senior writer and analyst Michael Giusti. That includes supply chain problems. It’s not that there are shipping containers filled with policies waiting to be unloaded at the Port of Los Angeles. But homeowners insurance covers home repairs, and many of the things you use to repair a house do, in fact, get shipped in from elsewhere.

In February 2022, for example, the price of lumber soared to $1,337 per thousand square feet. Although later in the year, lumber fell to $429 per thousand square feet, overall home repair costs in 2022 were expensive. Similarly, the cost of asphalt shingles and other roofing materials has risen 51 percent the past five years. Insurers eventually have to recoup those costs in the form of higher premiums.

Other ways inflation has hit homeowners policies:

Labor. You need people to repair a house, and labor costs have been rising as well. “If companies are paying their workers more, that’s been causing them to raise their own prices, and that, in turn, is going to make the cost of repairing a home pricier,” says Cate Deventer, insurance analyst for Real — inflation-adjusted — hourly earnings rose 4.6 percent the 12 months ended December, according to the U.S. Bureau of Labor Statistics.

Housing. House prices have also made big gains, meaning that the cost of replacing them has increased too. Home prices, as measured by the S&P CoreLogic Case-Shiller U.S. National Home Price Index, have gained 8.9 percent a year for the past five years.

Interest rates. To combat inflation, the Federal Reserve has been hiking short-term interest rates. Although there’s some indication that the Fed’s plan is working, rising interest rates drive up insurance prices as well, Giusti says. “In the end, insurance companies are financial services companies, and they need to borrow money to do business,” he says.

More losses. Hurricanes, wildfires, tornadoes and straight-line wind damage have become more frequent, and that means higher payouts for insurance companies, says Giusti. Even if you live in Iowa, if your company operates in other states, you may pay higher rates because of its losses from hurricanes elsewhere.

Reinsurance. Many insurance companies have reinsurance, which is insurance for insurance companies. “Any time you have widespread disasters like hurricanes and wildfires, what that does is it increases the cost of reinsurance,” says Deventer. “It’s spreading the risk of certain very high-risk areas around the entire globe.” Whenever reinsurance policy premiums go up, your homeowners insurance policy is likely to rise too.

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How to lower homeowners premiums

When is the last time you shopped for homeowners insurance? For many people, the answer is, “When I bought my house.” You might want to rethink that strategy. “See what’s out there and get a better policy,” Giusti says.

But shop carefully. “Make sure that you’re comparing apples-to-apples coverage,” says Devanter. In some cases, the reason you’re getting a lower premium is that you’re getting less insurance coverage.

Be sure to tell your insurance company about any discounts you may be eligible for, such as for installing a burglar alarm, a new roof or fire extinguishers. “If you’ve upgraded your electrical, plumbing or anything like that, it can definitely change the coverage that you need and the price you pay,” Devanter says.

The one thing not to do is cut insurance entirely. “If you have your mortgage paid off, don’t tempt fate and go without insurance,” Giusti says. “For most people, their home is their biggest asset.”

The average homeowners insurance premium nationally for a policy with $250,000 in dwelling coverage is $1,428 a year, according to Here are the states with the lowest and highest annual homeowners premiums.

5 states with the lowest average homeowners insurance bill per year

Vermont $658
Delaware $679
Utah  $696
Oregon $723


5 states with the highest average homeowners insurance bill per year

Oklahoma $3,659
Kansas $3,083
Nebraska $2,951
Colorado $2,152
Arkansas $2,123 


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