Let’s talk about why homeowners rates are going up in 2021.
The short and sweet version is that COVID has caused the price of building materials to SKYROCKET. Now let’s get into the details on what is causing these rates to increase.
Building supply shortage
Did you manage to swing by Home Depot during the summer? It was a madhouse. I think it was because people got bored. On top of the increase in demand logging companies slowed down, imports are being held up for months due to the government lockdown of their employees, which includes customs. We now have a disaster when it comes to building materials pricing.
You might have also noticed that housing inventory is at an all-time low, and homes that are up for sale are up 50% from last year. People are moving to Georgia at record rates, and builders simply can not keep up. Interest rates have never been lower, further causing the price of homes to match the affordability of consumers.
Shortage on blue-collared skilled workers
Prior to 2020, the number of builders has been limited. Simply put, the US convinced an entire generation of kids in the 90s that college was the only route to go. Now we have a retiring generation of builders, and a limited number of people to replace them. I personally know of a handful of college grads who went back to school to make over 100k/year going blue collared. This delay and shortage of new workers causes rates to increase when the supply is low but the demand is high.
So we take the building supply crisis, the already limited supply of builders, now add wind/hail storm damages, fire, and pipe bursts and insurance companies are having to essentially BRIBE builders to walk away from building NEW homes to rebuilding YOUR HOME.
So what does that mean in the future?
First: Do not slash coverages to save a few dollars. In these situations, the worst thing clients can do is remove “Additional Replacement cost Protection coverage of 25 or 50%”. Replacement cost calculators are only as good as the information used at the start of the policy. When we have events like this, having the additional 25 or 50 percent of coverage will help hedge the bet against running out of money in the event of a total loss.
The Good News is that all proposals sent to clients for coverage have this built-in. The ONLY time TWG will broker a policy without this coverage is if it is requested or removed by the client themselves. Even then I am kicking and screaming about how its a terrible idea, so you already know who you are!
What can you do to reduce your homeowner’s policy cost?
There are VERY few things we can do to a homeowners policy that is going to have a meaningful impact on the rate. The rate increases we are seeing are not on the endorsements but on the DWELLING COVERAGE A. This is also across the board.
But here are the few things that can help!
- Let’s make sure your Roof age and what we have in the system match. One of the biggest rating factors is the age of the roof. If you had your roof replaced recently, you need to call 678-921-3601 with the receipt in hand and give us a call. You can also email a copy of the receipt to firstname.lastname@example.org.
- Bundle home/auto- If have a mono-lined policy with any of our carriers, it might be a good time to consider bundling your home/auto for that big discount.
- Let us shop for you! While a 2-10% is average and should be anticipated if your rate has increased over 10% let’s talk! I have moved several clients over the last few months from one insurance company to another inside of the brokerage.
I hope this brought some transparency to the recent rate increases, what TWG has done to protect its clients against situations like these, and an action plan on how to mitigate the premium increase!