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.

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. You went to your independent insurance agent and they plugged in the information they needed to calculate your Coverage A limit for your homeowners insurance policy. They ask about the materials of your home, how big it is, etc., and calculate your Coverage A limit to be $200,000. You walk away with your policy and go on with life.

Now, let’s say a terrible storm blows through your county tonight and destroys your house. If your policy wasn’t updated, you have $200,000 to rebuild your house. But, since construction costs have increased, it’s determined by the contractors that they will need $230,000 to rebuild your house. This leaves you with a hefty bill, which is exactly what we’re trying to avoid by increasing your Coverage A limits.

How big of an increase should I expect to see on my bill?

There is no fixed percentage or amount of increase homeowners can expect. A few things that will influence the amount of increase you experience include:

• Where you live
• How long ago you purchased your home insurance policy
• Home remodeling projects
• Larger home improvement projects
• Other physical changes to your house that may impact value

We know it’s never fun to get a bill that’s higher than expected, but this increase is to ensure your policy includes enough funds to rebuild your home. Every rebuild situation is unique, so there is really no exact dollar amount to expect.

Why did construction and labor costs get so expensive?

It’s a combination of increased demand from home projects during the pandemic and shutdowns of manufacturing during quarantine. Basically, the demand for materials increased while the supply went down. Which isn’t exactly what you want to happen.

Is there anything I can do to lower my bill or lessen the impact?

The best thing you can do is verify the information used to calculate your new Coverage A limit. Specifically, you will want to look at the size and construction materials used in the calculation. The best way to go about doing this is to talk it over with your agent. Above all, make sure you have enough coverage.

Is there anything I can do to prepare?

• Keep up with maintenance
• Update your agent on any improvements to your house
• Talk to your insurance company’s customer service if you need to switch payment plans

Should I consider switching insurance providers?

Since the increase in costs of materials and labor is affecting insurance companies across the nation, switching providers may not help you find a cheaper policy.

If you have more questions or concerns about your new bill, your independent insurance agent is happy to look it over with you. In the meantime, follow us on Facebook for more insights on other changes in the insurance industry.

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Disclaimer: The analysis of coverage is in general terms and is superseded in all respects by the Insuring Agreements, Endorsements, Exclusions, Terms and Conditions of the Policy. Some of the coverage mentioned in this material may not be applicable in all states or may have to be modified to conform to applicable state law. Some coverages may have been eliminated or modified since the publishing of this material. Please check with your local Independent Auto-Owners Insurance Agent for details.