If you’ve been wondering why your home insurance is so high, then you’re not alone. In the last several years Nashville homeowner rates have gone up significantly. Let me shed some light on several causes of these increases.

Home Value

You should know that insurance companies use a number of factors to determine your homeowner’s policy, including the value of your home. These higher costs also affect the cost to replace your home if the unimaginable happens: a fire or accident that totally destroys your home. Your insurance is based on what rebuilding your home would cost.

Inflation

Construction costs go up a little each year due to inflation, and so does the insurance company’s inflation percentage. You can expect your insurance companies to pass on some of these costs to their customers—namely, to you.

Increased Coverage

Also, if you increase your coverage, then you’ll see an incremental increase in your premiums and deductibles. Makes sense, right? Insurance companies are hedging their bets. If you’re saying you want more money, more value, at a certain time in the future, then they’ll ask you to pay right now to offset that potential payout.

Construction Date

The year your house was built also affects your premium. Most companies offer newer house discounts. The initial premium is lower, but the company will gradually take that discount away as your house gets older.

If your home is brand new, built in 2015, then you may receive a low rate that includes a new home discount. As the years pass, that discount will shrink. As the discount shrinks, your costs grow. It’s good to be aware of this reality and manage your expectations accordingly.

On the brighter side, you can still get a discount for a new home purchase or for a newer roof. (You can now guess what happens to those discounts over time.)

Credit Score

Insurance companies use your credit score to help determine your personal insurance score, and by association, your home insurance costs. Insurance companies always check new applicants, and typically pull on your credit score at regular intervals over the years.

If your credit score goes down, your insurance costs will probably go up.

Claims

The last two reasons are the biggest ones: the insurance company’s claims and your personal claims.

Insurance companies base their rates on the claims they expect to pay. In 2011 and 2012, insurance companies paid out far more in claims than they expected to because of wind and hail damage to roofs in Nashville and around the Southeast.

When a company’s claims are higher than expected, they will ask for rate increases from the department of insurance, which must approve those increases. Most companies received significant rate increases in 2011 and 2012. Those have now plateaued because 2013 and 2014 were better years for the insurance industry.

Your Personal Claims

Any claims you have had personally paid on your home might also affect what you pay. Weather related claims don’t count against you, but other types of claims can affect your premium.

Five Steps for Decreasing Your Homeowners Insurance

“Now what?” you might be thinking. Here are some steps you can take if you think you might be paying too much for your homeowner insurance:

1. Keep your insurance company honest. One company might have a rate increase of 25%. Another might increase only 10%. Independent agents like Church & Associates represent more than one company. We can shop around, compare rates from multiple companies, and usually find you a more attractive option.
2. If possible, get your auto and home insurance from the same company. You will save on both.
3. Protect your credit. Make payments on time. Contact the credit bureaus, tell your side of the story, and politely ask for any deliquent payments or derogatory marks to be removed. The bare minimum of organization in your finances, along with one call or email in some cases, can save you a lot of money over time.
4. Don’t report small claims. Just eat the out-of-pocket cost. Two claims of $800 each are much worse than one $1600 claim. Thus, “getting what you’ve been paying for” out of your insurance will only add to your costs.
5. Check your coverage. Ask your agent to closely review your policy to ensure that you aren’t paying for any unnecessary extras.

That’s all for now. If you have any other questions about Nashville homeowner insurance, then be sure to leave a comment below.