The Cost of Homeowners Insurance: Is It Really Affordable?

Understanding the Average Homeowners Insurance Premium

In 2018, the average homeowners insurance premium was $1,249, marking a 3.1 percent increase from the previous year, according to the National Association of Insurance Commissioners (NAIC). This rise is slightly higher than the consumer price index increase of 1.9 percent in the same year, indicating that while premiums are rising, they are not outpacing general inflation.

The Financial Burden of Homeowners Insurance

Despite the increasing premiums, Americans generally do not view homeowners insurance as a financial burden. A 2017 survey by Triple-I found that only 31 percent of Americans consider homeowners insurance a financial burden, the lowest level in over a decade. This perception may be due to income growth consistently outpacing insurance costs, although the pandemic-related recession of 2020 could temporarily interrupt this trend.

Customer Service and Emerging Trends

Customer service is becoming a critical factor in the homeowners insurance market. Millennials, in particular, are more likely to choose their insurer based on service experience and are increasingly using insurer-provided tools to inventory their possessions. This trend is expected to intensify competition among insurers, with both large established companies and insurtech startups vying for premium dollars.

Additionally, there is a growing demand for parametric home insurance products, which automatically pay claims of a pre-agreed amount when certain events occur, such as a specific level of rainfall or wind speed. These products offer a more streamlined and potentially faster claims process, appealing to modern consumers.

For readers considering homeowners insurance, it's important to shop around and compare not only premiums but also the level of customer service and the types of coverage offered. Understanding the specific risks in your area and choosing a policy that adequately covers them can help ensure that your investment in insurance is both affordable and effective.