With homeowners insurance premiums on the upswing – and more increases likely on the way – many home owners worry they will no longer be able to afford coverage, two studies report.
One, from ValuePenguin, says two out of every three policyholders saw their rates rise last year, and three out four expect rate hikes again this year. The other, from Maxwell, found that a “staggering” 90% of the owners polled experienced rate hikes over the previous two years, some by 30% or more.
ValuePenguin, the insurance division of LendingTree, surveyed 2,000 policyholders, half of whom said they are concerned their places will become uninsurable. A quarter of them have already been dropped by their carriers.
To save money, a third of those queried have downgraded their coverage. A quarter of them question the value of insurance, and almost a third have considered going commando.
Those concerns are justified. “Many companies have had to raise their prices to stay solvent,” says ValuePenguin home insurance expert Rob Bhatt. “In some cases, they’ve stopped accepting new customers or pulled out of certain areas because they’ve been spending more to settle claims than they’ve earned in premiums.”
While a combination of issues are driving rate increases, people tend to place most of the blame on inflation. But a third of them say more claims are the culprit, and a similar percentage blame insurance company greed.
Shopping for more affordable policies is the most popular way to save money. But a third of the respondents have either downgraded or reduced their coverage, either by switching to higher deductibles or lowering policy limits, saving an average of $782 a year in the process.
Nevertheless, ValuePenguin found that the average premium is $179 a month, or $2,148 annually.
Interestingly, a large minority – 44% – did not ask their carriers for a discount, either because they didn’t know discounts were available or they didn’t want to go through the hassle of asking. Almost one in five sought a price reduction but were rejected.
Meanwhile, the survey from Maxwell, a mortgage technology firm, found similar results.
Nearly half the 1,200 owners polled questioned whether they can continue to afford their places because of rising insurance costs and property taxes, and almost a quarter of them fear their coverage will be terminated altogether.
If the current trend continues, almost three of every five said they’ll have to consider moving elsewhere within the next five years. “The future looks increasingly uncertain, with many owners considering significant life changes to cope with rising costs,” this report says.
People are “asking how they can afford to stay in their homes, even if they have a low mortgage rate,” commented Maxwell CEO John Paasonen.
The survey also found that 5% of the respondents don’t have insurance. Of that small group, 8% had their policies cancelled and 44% dropped coverage voluntarily because it became too expensive. Many of these people are opting to self-insure and plan to set aside founds to coverage potential losses. But some plan to seek a new carrier.
