Home Insurance Prices May Rise Soon

Posted November 2nd, 2009
by HomeownersInsurance.org Staff (no comments)


In the middle of a financial crisis, you can expect that prices are going to fluctuate. This is especially true when it comes to things like insurance. According to a recent study, it’s likely that home insurance premiums are likely to rise as profits for insurance companies come in lower than what everyone is hoping for.

For 2009, experts think that homeowners insurance will jump a total of about three percent for the year, bringing the average premium to $841 annually.

It isn’t just homeowners insurance that will be affected, however. It is suspected that, in 2009, the typical auto insurance policy will have risen a full four percent. This makes the average policy cost right around $875 per year. This rise comes on the heels of an average rise of three percent in the cost of auto insurance last year.

Term life insurance rates are seeing a premium increase, as well. Some analysts suggest that the premium prices for term life insurance could rise as much as five to 10 percent over the course of 2009 and 2010.

These increases come at a bad time, of course. With the unemployment rate reaching record highs and wealth falling, consumers will continue to struggle with making premium payments.

Part of the cause for premium prices are rising is the same cause of many peoples investment woes. The profits from insurance companies come primarily from investing the money that the insured pay into the company. If those investment returns drop substantially, the company’s profits will drop substantially. That is, as a matter of course, going to impact premium prices.

Laws are changing, too, that allows insurers to pass on certain types of costs to customers. A law passed in Florida, for example, allows insurers to ask the Office of Insurance Regulation to increase their rates. Seven of the major insurers in Florida are asking to raise their rates between eight and 15 percent, in spite of the fact that Florida has gone several years without a major storm disaster. These companies say they need the increased revenue to pay for higher reinsurance costs, which are costs used to cover backup coverage after catastrophic claims are filed.

One company, Universal Property & Casualty, has proposed an increase to their premiums across the state to the tune of 9.8 percent. This company is the third largest home insurer, and has about 461,000 policies in the state. State Farm Insurance has plans to leave Florida, as it has determined that recent regulatory changes in that state have made operating there unprofitable for their company.

Still, Universal Property & Casualty isn’t proposing the highest rate hike. That honor goes to St. John’s Insurance Company, who is proposing an average rate of increase of 14.9 percent.

This phenomenon isn’t limited to Florida, of course. Insurers across the nation are reassessing their premiums, and many consumers may soon find that they’re paying a little more each month for their homeowners insurance costs.

Categories: Home Value

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