Will Homeowners Insurance Go Down in 2023?

The home insurance industry is worth $800 billion, so you would think there is a surplus, especially for the big carriers, to pay out claims. If you’ve seen a hike in home insurance premiums in the recent past, without once filing a claim, you may be peeved. However, you must brace yourself because rates may continue rising until we grasp control over inflation and severe weather, the two main factors that have contributed to rising home insurance costs across the country. We are also still suffering from COVID related supply line disruptions, which have increased replacement cost of repairs, which are increasing at double the rate of U.S inflation, according to the Insurance Information Institute (III).

In 2021, the average home insurance rate increased by 9% and 7% in 2020. In 2022, some states increased insurance rates by up to 30%. Idaho topped the list with an increase of 34%! States hit by natural disasters saw an increase in wind and hail deductibles, up to 18% according to a LexisNexis Risk Solutions Report.

Americans paid, on average, $1,213.89 for homeowners insurance in 2022 but the average per state was wide-ranging. In 2023, we will all likely see prices climb, especially in states where rates have until now remained flat.

Keep reading to see why you should expect a hike and how you can save money despite rising prices.

Inflation and Homeowners Insurance

Homeowners should expect more of the similar rate hikes in 2023 that they saw in 2022, especially in states that have yet to raise prices. The Consumer Price Index increased by 7.7% over the 12-month period that ended in October 2022. Earlier in the year, the index grew 9.1% by summer. That jump was the largest increase in 40 years, which is bad news for the economy.

The prices for materials necessary to rebuild or repair a home have risen due to inflation. Therefore, everyone’s home insurance rates increased, even if they did not file a claim. If you have filed a homeowners insurance claim, expect a relatively steep increase or incremental increases over the course of 2023.

COVID’s Part in Homeowners Insurance Rate Spikes

Supply chain issues are the number one factor causing home insurance rates to spike in every state, even ones that saw no natural disasters in 2021 or 2022. Replacement costs started to rise when COVID first hit and there were supply line disruptions. It wasn’t just a toilet paper shortage; car parts, materials for homebuilding – everything came to a halt and we’re still struggling to get back to pre-COVID numbers.

In 2023, we will all likely see prices climb, especially in states where rates have not yet increased.

Labor Shortage Raises Premium Rates

The cost of labor increased due to a shortage in construction workers (over 400K short!), a statistic that is only expected to worsen over the course of the new year, thereby increasing costs.

Russia’s War With Ukraine Is Affecting Gas and Supply Lines

Even though the war is not our war, we are affected due to geopolitical shifts. Russia’s manipulation of oil pricing affects us as well as our supply lines and distribution costs.

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Severe Weather and Rising Homeowners Insurance Costs

In 2021, $92 billion worth of insured damages were paid out by insurance companies in just one year! Some states had unusually high rates of disasters, like the series of wildfires that burned hundreds of homes in Colorado and the snow dumped on Texas by Winter Storm Uri. The 2022 $9 billion loss in Florida caused by Hurricane Ian also raised prices across Florida and beyond. All insurers are terrified at the devastation severe storms are causing around the country. Take a look at what kind of financial impact recent storms and wildfires have had:

Type of Storm	Name	Year	Insured Losses
Wildfires	Colorado Wildfires	2021	$801.17 million
Winter	Winter Storm Uri	2021	$195.6 billion
Hurricane	Hurricane Ida	2021	$75 billion
Hurricane	Hurricane Ian	2022	$67 billion

LexisNexis Risk Solutions report found that home insurance claims cost increased by 7% in 2021, weather-related insurance claims for water damage increased by 329% between 2020 and 2021. The storms and fires over the past two years have been so costly that they caused multiple insurers to go out of business or drop policies in high-risk areas.

Certainly, there were homes not taken into account in the losses documented in the table above, too. They were destroyed and could not be rebuilt because the homeowners were uninsured. FEMA can only payout a small sum for emergency help. FEMA assistance is nowhere near enough to rebuild a home, only homeowners insurance can finance rebuilding, unless you have substantial savings. Homeowners who did not have flood insurance were and are still in a bind.

Flood, Earthquake and DIC Insurance

Some disasters, like floods and earthquakes, have their own insurance products, and homeowners insurance did not cover those claims. A DIC policy is also sold separately and covers landslides. Homeowners who suffer losses for these types of natural disasters are not covered with homeowners insurance alone. They must buy these three types of policies separately.

Wildfires and Rising Homeowners Insurance Prices

Colorado saw a series of wildfires over the course of 2021, which cost the state over $800 million. The state now has the highest home insurance rates in the country as a result. California’s wildfires totaled over $300 million. Even though insurers have raised premiums already,t prices are expected to increase even more over the course of 2023.

Consequences of Weather and Fire Events

If an insurance company thinks that paying out more claims in high-risk states will result in financial instability, they won’t write new policies, leaving homeowners to choose from a small pool of state insurers. In some states, like Louisiana, rate hikes have been approved by state insurance departments. Louisiana's rates went up a whopping 63%, according to Forbes, after experiencing hurricane Ida’s wrath in 2021. And because of the devastation that Hurricane Ian wrought,  Florida’s state insurer raised rates by 6.4%, instead of 11%, which was what insurers had hoped for, and so it will be a struggle for these carriers to stay solvent going forward.

Supply chain issues are the number one factor causing home insurance rates to spike in every state, even ones that saw no natural disasters in 2021 or 2022.

How To Lower Your Homeowners Insurance Cost

Increase Your Deductible

When you increase your deductible, your premiums are smaller. And vice versa. Having a higher deductible will also make you more discriminating over which claims to file and which to pay out of pocket. Say you choose a $1,000 deductible. Your premiums will be pretty low. You’ll also avoid filing frivolous claims which are really not worth it. Each claim raises your policy rate, and filing too many claims may get you dropped by an insurer.

Buy a Home Security System

The more comprehensive a system you have, the higher the discount on your policy. A 24-hour monitoring system will get you a bigger discount than cheap cameras you buy for $20. However, you can set up your own security system using Nest and

Other Discounts

Are you a veteran? Do you own more than one property and qualify for a multi-policy discount? Go over the list of discounts your carrier offers to make sure you’re ticking off all the boxes that apply!

See if Bundling Reduces Prices

Sometimes, bundling home and auto will save you money, but not always. That’s why it’s important to compare prices, both separately and in bundles, as well as across several carriers.

Compare Rates From Other Insurers

Using an online insurance comparison tool, you can do the work of gathering quotes much quicker than calling the carriers directly. Also, pricing changes daily so avoid taking days to gather your information and quotes. Do it all in one shot by entering your zip code on this page and answering a few questions to let agents offering the lowest rates know you’re actively shopping.

Raise Your Credit Score

Your credit score is a big factor in how you’re rated for home and car insurance, in most states. Take some time to catch up on debts and pay your bills on time. In six months to a year, check in with your insurance agent because you may be eligible for a lower home insurance rate.

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Key Takeaways Expect a significant increase or incremental increases in 2023. Take the necessary steps to lower your rate by bundling, increasing your deductible, raising your credit score, applying discounts, installing a security system and comparing rates. Consider adding flood insurance, especially if your home is in or near a flood zone.

Don’t be discouraged by the big hike in homeowners insurance. You may be able to save money by just answering one short questionnaire after entering your zip code below. Comparison shopping is a proven and effective way to find a cheaper rate. After you submit your answers, agents will call you with their offers. You simply choose the plan and price that fits your needs.