With home prices, mortgage rates and property taxes taking center stage in almost every conversation about housing affordability, one little factor seems to be flying under the radar: insurance costs.
For most homeowners, taxes and insurance get bundled up in escrow and added to the total monthly mortgage payment – so it’s easy to lose track of exactly what caused your payment to go up unless you pay close attention to that kind of thing.
I feel like I spent most of 2022 and 2023 sounding the alarm on the coming wave of property tax increases and then helping clients file appeals with the county assessor. What I didn’t quite see coming was the massive increase to insurance costs that was right behind this.
While property tax increases weren’t small potatoes by any means (averaging about $650 per household) – that pales in comparison to what’s been happening with home insurance.
A personal anecdote
My (former) carrier sent me a renewal rate that would’ve increased my home insurance from $2,400/year to $4,300/year. I was floored. How? How can they justify a $1,900 increase? That’s an 80% change! What the heck are they smoking??
Well, I wasn’t going to give them a chance to explain. I picked up the phone and called my trusty insurance agent and…that’s when I learned how they could justify a $1,900 increase…
In a very gentle way, I was informed that no other carrier would cover my property because most carriers want to get out of Colorado, and when viewed on satellite imagery my property had a concerning amount of trees overhanging my roof. Bastards!!
But! There was hope. If I just trimmed the trees back a little I could get coverage at a rate even lower than what I was paying before. Great!
Except the trees in question would have to be “trimmed” to the point it would kill them…so I did what any sane, sober, moral person would do in this situation. I went scorched earth. I cut down every tree that could so much as brush my solid brick home with a stronger than gentle breeze.
Take that mother nature! You are no longer a threat to this household.
Did I spend way more than $1,900 doing this? Yes. But that’s beside the point. I’d rather support my local arborist than those fat cat insurance tycoons. Plus, it’s an investment that’ll pay off in the long run and now I get more light in my back room so win/win.
Now, for some perspective
Because I feel like it’s not getting enough attention. Let’s circle back to property taxes increasing by an average of ~ $650/year or ~ $54/month. THAT created a political crisis so large our loving politicians crossed the aisle and worked day and night to shave about $150 ($12.50/month) from those costs for all of us. Thanks guys.
Am I the only one noticing a deafening silence when it comes to insurance rates? Don’t even get me started on what this has done to the condo market with some HOA policies skyrocketing over 400% in just a couple years.
While my experience (an 80% increase for about $160/month) isn’t necessarily the average, it does seem like it’s becoming quite common with several insurance companies wanting out of the Colorado market altogether.
Well, unlike property taxes, we at least have some control with insurance costs if we pay attention and take the steps to find savings.
It’s also something I’m making sure receives extra attention in transactions with my clients.
Yeah, that insurance carrier that you’ve had for 20 years with no claims? They’re not going to cover your new home because they’ve decided that most of Castle Rock, or some part of Applewood, or the entire state of Colorado is an eminent wildfire risk.
Will the buyer for your home still qualify if their insurance is $200/month higher than what their lender estimated? Believe it or not, that could easily kill a deal and plenty of agents and/or buyers treat insurance like an afterthought only to learn after it’s too late that they can’t get the mortgage.
So, who or what can we blame for this??
Aside from the obvious – inflation – which made literally everything 10x more expensive than just a few years ago. We also have:
- Natural disasters: Mainly hailstorms but insurance companies are mostly pointing the finger at wildfire risk due to climate change. Yeah, your downtown condo had to increase their HOA dues by $500/month because a wildfire might hop I-25 and burn it to the ground.
- Reinsurance costs: Reinsurance is a type of insurance that insurance companies purchase to protect themselves from catastrophic losses. The cost of reinsurance has been rising in recent years, and this increase is being passed on to homeowners in the form of higher premiums.
- Legislative and Regulatory Changes: The list here is long, arduous and probably deeper than anyone really knows but through a combination of building code changes, insurance coverage requirements and consumer protection laws – insurance companies are forced to take on added costs which they naturally pass down to consumers.
- Litigation and Fraud: If you show a roofer your roof, they’ll probably find some way to make a claim – same goes for disaster mitigation companies if you spill a glass of water in your basement. Insurance companies have gotten a little more wise recently but it’s probably too little, too late. Like going to the doctor, there’s a price they’ll charge you with insurance and then there’s a much different, much lower price they’ll charge if you self-pay.
What can we do to reduce our home insurance costs?
Murder your trees!! I’m kidding…kinda…
- Shop around for the best rate: There are a number of different insurance companies that offer home insurance in Colorado. It is important to shop around and compare rates from different companies to find the best deal.
- Adjust coverage you might not need: I actually found that my previous agent had me way over covered on replacement cost. I reduced this and was able to add in sewer line coverage that I didn’t have before and I still saved.
- Raise your deductible: Weigh your options here and see if any savings on your premium are worth the added risk. Maybe the money saved can be put to better use elsewhere?
- Make improvements that help you save: Installing features like security systems, drainage (sump pits/pumps), hail resistant or metal roofing…etc can reduce your premiums and lower maintenance costs at the same time. Make sure to tell your carrier if you’ve done any kind of improvement that adds safety or efficiency to your home.
- Bundle your policies: If you have other insurance policies, such as auto insurance, you may be able to get a discount on your home insurance premium by bundling your policies with the same company.
Take control of your home insurance costs today. Shop around, compare quotes, and find the coverage that fits your needs and your budget. Remember, an informed homeowner is an empowered homeowner! Give me a call any time if you need a referral for a great insurance agent!
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Have you ever considered the impact of alien invasion insurance on housing affordability? With the rise of extraterrestrial-themed insurance policies, should homeowners factor in the potential cost of little green men into their budget?
This is an important factor to consider and one I’m sure insurance companies are keeping a close eye on!! hahaha