If you are a homeowner, you've already noticed your home insurance premiums aren't just creeping up. For many, they're soaring – up nearly 37% nationwide over the last decade, according to data from the Federal Reserve. Meanwhile, car insurance premiums have jumped over 50% in the same time period.
The impact has hit some states harder than others, and a study published this week by Bloomberg Intelligence found that the problem is so widespread that most homeowners are now spending more on insurance than they are on property taxes.
Between higher mortgage rates and higher home prices (which come with higher property taxes), homeowners in today's market are already feeling squeezed. Tacking on soaring insurance rates is just one more thing inflating your monthly escrow payment. Here's what the study found and what you can do about it.
Insurance premiums are a bigger burden than property taxes for most homeowners
In October, the average cost of home insurance nationwide hit $2,808 per year, according to Insurify. But some states are seeing even more expensive home insurance premiums. Nebraskans, for example, have seen rates soar 79% over the last 10 years, according to the Bloomberg analysis.
Among the major reasons cited for the historically high rates are increased climate change-related risks as well as rising home values and the rising cost of repairs. Similar reasons are cited for car insurance, which the study also tracked.
When the two are bundled together, the total cost amounts to a substantially higher bill than property taxes for homeowners in 75% of counties nationwide. On average, Bloomberg found that home insurance alone is about 14% more expensive than property taxes in these counties. When you add in car insurance, the average price difference hits 30%.
In some regions, particularly in the Southeast, insurance premiums can be as much as four times higher than a typical property tax bill.
Ways to lower your insurance premiums
Seeing headlines like this at a time when just about every other part of your budget is also hurting from inflation is hard. While you may not be able to completely reverse the skyrocketing prices you're seeing, there are some steps you can take to push the rates you pay back down.
Before you buy a house
If you don't own a home yet and this news is making you reconsider whether you're ready to take the leap, here are some tips to try before the move to minimize your future monthly payments:
- Buy less house. While a big house sounds nice, more house means more coverage requirements. If you're willing to make a slight tradeoff – even downsizing your search from, say, a four-bedroom to a three-bedroom or the same room count but in a smaller footprint – you'll be rewarded with lower premiums.
- Look for newer construction. This strategy can be tricky to balance. New construction is typically cheaper to insure, but the home price might be higher than something a little older. It's probably not worth buying a more expensive home purely in hopes of seeing a lower insurance bill. But if you're deciding between two homes at a similar price point, the newer one might come with slightly lower rates.
- Check the flood hazard zone. The FEMA flood maps are an imperfect tool for evaluating a home's actual flood risk. But insurance companies do use those flood zone designations when setting rates. Choosing a home with a lower risk according to the map can lead to savings on insurance.
- Find the closest fire station. A home that's minutes away from a fire station will cost less to insure than one that's further out. Spotting a fire hydrant on the street is also a good sign that an insurer will view this as a lower-risk property.
- Skip the backyard pool. Alright, if your heart is set on having your own pool, get it. But know that the pool will mean a higher insurance premium. They're seen as a liability hazard by most insurers. So if it isn't on your "must-have" list, it's better to skip the pool and use your premium savings (and pool maintenance savings) to instead get a membership to a gym that has a pool or a local community pool.
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If you're already a homeowner
For those who already own a home, you might feel like your options are limited. Moving into something cheaper to insure might be out of the question if you locked in an interest rate far lower than what's available today. But you do still have some tricks up your sleeve to tamp that premium back down:
- Replace your aging roof and systems. If your home is older and in need of a new HVAC system or new roof, making those upgrades (and then telling your insurer about it) can lead to serious savings. The same goes for older plumbing and wiring – though those can be more costly and difficult to replace if you're not already planning a major renovation.
- Do some DIY fireproofing. For those in California or other places with a higher fire risk, taking steps to fireproof your home can result in lower premiums. In some cases, the savings could be in the thousands if the fireproofing is enough to get you off the FAIR plan and onto a standard home insurance policy. If that's your goal, call your insurer ahead of time and find out what kind of fireproofing measures you should do to make the switch.
- Pay your policy in full up front. This works for both home and car insurance. Many insurers offer a paid-in-full discount that can knock a couple hundred bucks off of your bill. It's not exactly a windfall, but it's an easy way to trim your costs down a bit.
- Raise your deductible. If you have a healthy emergency fund, it can be worth leveraging that to lower your premiums. A higher deductible means you're agreeing to shoulder more of the costs of any covered damages. But if your emergency fund can bear the deductible amount, that tradeoff could shave another couple hundred bucks off of your bill.
- Shop your insurance ahead of every renewal. Switching home insurance won't always lead to savings, but it often will. It only takes a few minutes to compare quotes online and could end up saving you hundreds every year. If you don't find a cheaper quote, at least you will know for sure that your current rate is the best available.
Start the hunt for a better rate with our home insurance comparison tool below: