Navigating the Rising Tide of Homeowners Insurance Premiums: What You Need to Know

The Escalating Cost of Homeowners Insurance

Homeowners insurance premiums are increasing at a rate faster than inflation, according to data from S&P Global Market Intelligence. From 2017 to 2020, premium rates rose by an average of 11.4 percent nationwide. Factors such as rising material costs and supply chain disruptions have driven up home replacement costs, prompting insurers to adjust premiums accordingly. The nationwide average annual premium has surged to $1,398 in 2021.

The Impact of Natural Disasters and Climate Change

Insured damage from natural disasters like tornadoes, hurricanes, severe storms, and wildfires reached $82 billion in 2021, bringing the total from 2017 through 2021 to over $400 billion. Average insured natural catastrophe losses have increased nearly 700 percent since the 1980s. Climate risk continues to put pressure on weather-related events, with more severe hurricanes and wildfires being observed. The severity of tornado events is also on the rise, although the frequency remains unclear.

Pandemic-Driven Supply Chain Disruptions

The pandemic has further exacerbated the situation with supply chain disruptions. Lumber producers, fearing a repeat of the Great Recession, cut production and unloaded inventory. However, demand soared, leading to a 400 percent year-over-year increase in the price of lumber to $1,500 per thousand feet of board in March. Homeowners can find recommendations for lowering their insurance costs on Triple-I's website.