It’s official: This has been a record-breaking year for severe weather. Among its legacies, unsurprisingly, could be higher costs to insure your home in 2022.
The weather data for 2021 is truly dire. According to the National Oceanic and Atmospheric Administration, the U.S. endured an unprecedented 18 weather disasters that each caused more than $1 billion in property damage. And the NOAA list isn’t even complete, since it ends on October 8 – meaning it doesn’t include the financial tally from December’s devastating tornadoes in Kentucky and other states.
The billion-dollar blowouts occurred in all regions and seasons, and included a drought and wildfires in the west; a hailstorm and thunderstorms in the midwest; spring flooding and Hurricane Ida in the south; and a severe winter storm in the northeast.
While those disasters created a tsunami of home insurance claims, weather isn’t all that’s driving up insurance costs. Pandemic-related shortages in labor and building supplies have boosted the cost to repair and replace homes. And the costs for flood insurance – which requires a separate policy – are on the rise for many homeowners due to new assessments of flooding risk.
Here’s what insurance professionals say you should expect when insuring your home in the coming months, along with a major addition to consider to supplement it – adding a flood policy.
Brace for higher rates and fewer insurers
Whether your costs for home or rental insurance rise in 2021, and by how much, will depend on your carrier and where you live, says Robert M. Lajdziak, director of insurance intelligence at J.D. Power and Associates. “But…yes, we’re going to see prices go up for coverage.”
The increases may be substantial, according to Dick Lavey, president of Hanover Agency Markets at The Hanover Insurance Group, who predicts average hikes in “the 8% to 10% range, which is higher than general inflation.” (Those would also be far higher than the change for most homeowners from 2020 to 2021, when the premiums for homeowners and renters insurance actually declined slightly on average, according to the Bureau of Labor Statistics.)
Insurance companies that have sustained huge losses from recent years of mega-wildfires in California, for instance, are sinking resources into sophisticated modeling technology. The adjustments to insurers’ risk modeling programs are not only prompting increases in premiums. Some companies are taking more drastic steps, like dropping out of certain markets entirely.
“Within the last week, I had an insurance company tell me they’d no longer write insurance policies in their admitted states,” says Robb Lanham, chief sales officer for HUB International Personal Insurance. “They can’t make a profit.”
Consider flood insurance
Despite the prospect of pricier premiums, Lajdziak predicts a continuation …….