Here's Why Home Insurance Started Going Up in 2020
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If you opened your home insurance bill recently and noticed it’s significantly higher, you’re not alone. In fact, homeowners across the nation are facing rising home insurance bills regardless of their insurance company.
The good news is this is happening to make sure you have enough coverage.
Why is my home insurance bill so high?
Short answer: It’s more expensive to rebuild your house because of rising construction costs.
The cost to rebuild your house is more expensive now than when you purchased your policy, not because you changed anything, but because the costs of construction materials have increased dramatically since the 2020 coronavirus pandemic.
To be specific, within most standard homeowners insurance policies there is a coverage called Coverage A (creative name, right?). Coverage A is what protects your house and attached structures, which may include an attached garage, breezeway or deck. If your home is destroyed in a covered disaster, your insurance company agrees (under Coverage A) to cover the costs of rebuilding it up to the amount of your policy’s limit.
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When you purchased your homeowners insurance policy, your Coverage A limit was determined and used as part of the calculation for your payments. The estimation was based on several things, including the costs of construction materials, labor and even debris removal at the time.
However, since the costs of lumber and construction materials have increased tremendously, the cost to rebuild your house may exceed the amount of your Coverage A limit.
This may leave you covering a big part of the rebuilding costs, and nobody wants that. To avoid this, insurance companies are recalculating the cost to rebuild your home and increasing the amount of Coverage A to accommodate these higher construction costs. This results in higher bills to compensate for the increased coverage amount.
Ready for an example?
Let’s say you bought a nice little house in 2017 for $150,000...