Top Seven (7) Reasons Your Homeowners Insurance Premium Increased

So you just received your Ohio homeowners insurance renewal and noticed that your premium increased. Your first question is, naturally, “Why?” 

Honestly, there are many reasons why a home insurance premium increases. We’ve listed the most common ones below- chances are good you’ll find the reason below. And if you don’t, you’ll have solid information to start asking questions about your own policy.  

Reason #1 your homeowners insurance premium increased- Your insurance company raised their premiums

This is how pretty much all insurance works: when you pay your homeowners insurance premium, it gets lumped in with other people paying their premiums. When claims are paid out, they’re paid from those same premiums. So if Joe Smith has a claim, premiums you’ve paid help Joe Smith fix his house or pay medical bills for someone who got injured on his property (an oversimplification, but you get the point).

Insurance companies are required by state law to keep a minimum amount of premium in reserve for claims payments. When claims paid start to exceed premiums collected, and the reserve is depleted, the insurance company raises premiums across the board to replenish this amount for future claims (yes, this could mean you). Again, it affects ALL policyholders with that policy type- not just you.

Reason #2 your homeowners insurance premium increased- The inflation guard endorsement

Most homeowners insurance policies insure a home at replacement cost, which is the cost to repair or replace a home at today’s costs. Since the costs associated with repair or rebuilding can change from year to year (most often going UP), many homeowners insurance policies include an “inflation guard” that increases the amount of coverage on the house by a set percentage, like 2%. So at each renewal, the amount of dwelling coverage increases by 2. Naturally, the premium would also increase by the same amount.

Reason #3 your homeowners insurance premium increased- A claims surcharge has been added

Each insurance company has guidelines as to when and by how much a premium will increase based on a claim. It may only take one claim, regardless of paid amount, OR maybe the claim has to be above a certain dollar amount. In any case, once the qualifications are met, the insurance company can increase the premium by a certain amount at your renewal. When in doubt, ask, as it may not be listed on the policy that a claim surcharge has been added.

Reason #4 your homeowners insurance premium increased- You lost a discount

Most policies have several discounts included and if those discounts disappear, your rate may increase. If you’re receiving a discount for being claim free, then have a claim, the loss of the discount will increase your rate. Maybe you were receiving a discount for having your policy on EFT and you changed your payment plan. You might see a slight increase here too. Maybe you were receiving the multi-policy discount and you cancelled your auto policy. The point is, there are many possible reasons for losing discounts. So ask if that might be the reason. 

Reason #5 your homeowners insurance premium increased- Your insurance score changed

Since 2003, the Ohio Department of Insurance has allowed the use of insurance scoring in rating auto and home insurance policies. An insurance score depends heavily on credit information. Although each insurance company uses its own insurance scoring model, some of the biggest factors that affect your score include:

  • Bankruptcy, foreclosure, repossession
  • Payment history- late payments, missed payments
  • Length of credit history
  • Number of credit lines
  • Type of credit
  • Outstanding debt
  • Inquiries into your credit history

If your credit history suddenly changes for the worse, then you will probably see a premium increase. For more detail concerning how and why insurance companies use credit history in premium determination (along with helpful tips to improve your score), read How Credit Information Can Impact Insurance Premiums from the Ohio Department of Insurance.

Reason #6 your homeowners insurance premium increased- You’re just now seeing the full impact of a change you made during the policy term

This one really messes people up, but it happens all the time. And let’s face it, something we did 6 months ago is harder to remember than something we did last week. Here’s an example: Let’s say your policy runs from June 1- May 31.  Maybe you added some jewelry  or increased the amount of the home coverage on November 1. You’re only charged premium from the date of the change until May 31, the end of the policy period. That’s called pro-rata premium.

But when you get your renewal for the following June 1, naturally you’re going to see a higher premium, because you’re now seeing premium for the ENTIRE policy period. So it may look like your policy premium went up significantly, when in reality you only paid premium for the portion of the policy period and at renewal you see the full impact of the change. 

Reason #7 your homeowners insurance premium increased- The company made a mistake

I know right? But, honestly I have seen it happen. In fact the most common mistake we see is the removal of the auto/home discount. The only vehicle is sold, and the auto policy is cancelled. A few months later, the insured buys a different car, and another auto policy is written, but the system doesn’t catch the new policy. So, yes it happens! And this discount can often range between 15 and 20 percent, so you would definitely notice that change! So yes, it happens. And we as agents certainly do our best to catch these, but yes, we may miss it. So, when in doubt, ask!

Need someone to take a second look at your Ohio homeowners insurance policy? We’re happy to review and offer our recommendations. Call us at (937) 592-4871 or fill out the form below. We’d love to help!

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Are you ready to save time, aggravation, and money? The team at Alan Galvez Insurance is here and ready to make the process as painless as possible. We look forward to meeting you!

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