Why Did My Home Insurance Go Up?

No one likes a rate increase. We want to buy insurance at a reasonable premium and why can’t it stay there!?

You get your home insurance renewal and think, “Surely this will be fine, “ but then you open the letter. There it is, the new premium. Your heart sinks. It went up. Again. Now you are standing in your kitchen, holding a renewal packet, wondering why you even buy this at all. Then you remember why. Two very simple reasons: The first is that you aren’t brave enough to go through a Kansas storm season without it and because your mortgage company says you have to.

So why did your home insurance go up?

The frustrating answer is this: probably for several reasons at the same time. A recent Pew Research Center survey found that 71% of U.S. homeowners say their homeowners insurance cost has gone up over the last few years. In the Midwest, that number was 73%. If your renewal made you want to bury your head in the sand, you are not alone. Let’s talk about what is actually happening.

First, it may not be about you personally.

This is the part that feels unfair. You may have had no claims. You may have maintained your home. You may have lovingly cleaned your gutters, replaced your sump pump, and prayed for your roof before every storm. However, your premium can still go up.

Insurance rates are based on more than just your individual home. Carriers also look at the bigger picture: weather losses, claim costs, rebuilding costs, labor, materials, litigation, and what it costs to repair or replace homes in your area. In Kansas, we also have our own special little weather personality. Wind. Hail. Tornadoes. Ice. More wind. More hail. A random 72-degree day in February followed by the promise of Snowmegeddon if Dillon’s unstocked shelves are to be believed. When insurance companies pay out large amounts in a region, that loss experience can affect future rates for everyone in that area.

Your replacement cost may have changed.

One of the biggest misunderstandings in home insurance is the difference between market value and replacement cost. Market value is what your home might sell for.

Replacement cost is what it would cost to rebuild it. These are not the same things. You may think, “My house would sell for $300,000, so why is it insured for $425,000?”

Because the insurance company is not trying to buy your house. It is trying to estimate what it would cost to rebuild your house if something major happened.

That includes materials, labor, debris removal, contractor demand, code updates, and all the very unfun things that happen after a major claim. The Kansas Department of Insurance specifically warns homeowners not to confuse replacement cost with market value when reviewing home insurance. Unfortunately, rebuilding costs have not exactly been known for their steadfastness in the last few years. Covid, weather, and inflation have quite literally caused the perfect storm.

Your roof is probably a bigger deal than you think.

In Kansas, your roof is not just a roof. It is a weather helmet and insurance companies care very much about weather helmets.

Roof age, roof condition, roof material, prior damage, and how the policy settles roof claims can all affect your coverage and premium. The Kansas Department of Insurance lists roof condition and prior losses as factors that may affect homeowner underwriting and pricing . This is also why you may see more conversations about roof payment schedules, actual cash value roof coverage, cosmetic exclusions, or higher wind/hail deductibles. You may not think that 10 year old roof that seems like it is in great condition is anything other than perfect, but to the insurance company, that simply means a claim is coming with the next hail stone hit.

But they matter.

A cheaper policy is not always cheaper if it quietly changed how your roof claim would be paid.

Watch the wind/hail deductible.

This one deserves its own little spotlight. Many homeowners are used to thinking of their deductible as a flat number. It is not so long ago that we say home insurance deductibles at $500 or even $1000. Many policies now have a separate wind/hail deductible, and sometimes that deductible is a percentage of your dwelling coverage.

That means a 1% or 2% wind/hail deductible may not feel like a big deal until you do the math. If your home is insured for $400,000 and you have a 2% wind/hail deductible, that is an $8,000 deductible for a wind or hail claim. Eight. Thousand. Dollars.

So before you celebrate a lower premium, make sure you know what you are giving up to get it.

Actual cash value vs. replacement cost matters.

This is another sneaky one. Replacement cost generally means the policy is looking at the cost to replace damaged property with similar new property, subject to the terms of the policy. Actual cash value usually means depreciation is part of the equation.

In plain English: if your roof is older, actual cash value coverage may pay you based on the depreciated value of the roof, not the full cost to replace it. ACV isn’t inherently bad but it can be a very unpleasant surprise if you aren’t prepared for it. This is why we encourage people not to shop home insurance by price alone. The cheapest quote may be cheaper because something important changed. No one wants to learn that after the hailstorm.

Claims history can follow you.

Insurance companies may consider prior claims when determining eligibility and pricing.

This does not mean you should never file a claim. That is what insurance is for, but it does mean you should be thoughtful.

A $900 claim with a $1,000 deductible is not a claim. It’s paperwork.

Before turning in a claim, it is often wise to talk through the situation with your agent. Sometimes filing makes perfect sense. Sometimes it may be better to gather information first, get an estimate, and understand whether the damage is likely to exceed your deductible. The goal is not to scare people away from using their insurance.

The goal is to avoid accidentally creating a claims history over something that was never going to be paid anyway.

So what can you actually do?

You may not be able to control the weather, construction costs, or the insurance industry’s general chaos. You can control how well you understand your policy.

Here are a few things to review:

• What is your dwelling coverage limit?

• Is your roof covered at replacement cost or actual cash value?

• Do you have a separate wind/hail deductible?

• Is that deductible a flat amount or a percentage?

• Do you have water backup coverage?

• Do you have enough personal property coverage?

• Do you have jewelry, collectibles, firearms, equipment, or other items that may need special coverage?

• Have you asked about discounts?

• Is your coverage still appropriate for your home today?

• Is your agent ready and willing to educate you or are they peddling a product/price tag at you?

The bottom line…

If your home insurance went up, you are not alone. It may be because of weather losses, rebuilding costs, roof age, underwriting changes, deductible changes, or a combination of all of the above. The important thing is not to panic and slash coverage just to save money. That can feel good for about five minutes. Then a storm rolls through, and suddenly that “cheap” policy is not so cute anymore.

At Shepherd Insurance Group, our job is to help you understand what you have, what changed, and what options make sense for your real life. We cannot make Kansas weather behave. We can help you review your coverage, understand your deductibles, and make sure you are not accidentally trading important protection for a slightly smaller bill. Afterall, insurance is confusing enough already.

Call us and we can help. We think it should be easier and you should be able to avoid heart palpitations when grabbing that renewal notice out of the mailbox.

Dealing with Destruction in Andover, KS

As my family and I sat down to dinner in a local pizza place, a cacophony of phones began to blare warnings which was only eclipsed by the screaming sirens outside. The patrons of the busy restaurant crowded into the windowless bathrooms for protection. Small children were oblivious or terrified depending on their mother’s poker face as she wondered if the impending tornado would strike her home. Unfortunately, many of those mothers’ concerns were well-founded.

The EF3 tornado that struck Andover the evening of April 29, 2022 decimated homes, snapped great oaks in half, and ripped apart community buildings and schools. All in all, city official’s early estimates say that up to 100 structures received significant damage, not to mention to widespread pea to golf ball-sized hail that pounded the surrounding metropolis. Miraculously, no deaths were reported!

Picture taken near the Sedgwick and Butler County, Kansas line.

The devastation is shocking. Tornadoes are mystifying in their senseless path of chaos. It misses one neighbor entirely only to level the next cul-de-sac. The official Andover City page pleads with Good Samaritans to stay home and let first responders deal with the dangerous gas leaks and felled power lines. As our community sifts through the rubble, we find there are as many questions as answers. Where can we help? What can be done?

Andover, KS Tornado destruction April 29, 2022

For our part, as an independent insurance brokerage, we hope to be a resource for our clients and fellow neighbors during this difficult period. Here are a few common questions we have received during this catastrophe:

• What if it isn’t safe to stay in my home?

  For homes that are uninhabitable due to storm damage, most homeowners’ policies will provide for hotel stays. Be sure to hold onto receipts not only for the night’s stay but also for meals, toiletries, and prescriptions that had to be filled due to the displacement.

• Do I need to file my claim today?

  The short answer is no. Concentrate on staying safe and mitigating further damage. The claim can be filed later. Most carriers offer 1-2 years from the date of loss to complete repairs.

• Should I file a claim to have my home checked for hail damage?

  We would recommend that you start with an independent roofer first. A roofer (or two) can evaluate if you sustained damage. Once they have verified damage, call your agent to file the claim. We recommend this for one simple reason: if there is no damage and a claim is filed, it can result in a $0 payout claim which can raise your rates. It is important to try to only file claims that exceed your deductible amount.

• Should I trust a roofer or contractor that stops by my home and offers to give a bid?

  Buyer beware. Is this a local company? How long have they been in business? What is their rating on the Better Business Bureau? Do they have reviews online? Sometimes a referral from your local agent or neighbor goes a long way toward avoiding fly by night storm chasing “roofers” that disappear with your down payment.

• My car has hail dents. What do I do?

  Verify that you have comprehensive (or Other than Collision) coverage and inquire about your deductible with your agent. Assuming the damage exceeds your deductible, file the claim with your agent.

• My business is damaged. I don’t think I can be open for business tomorrow!

  Most business owner’s policies provide coverage for lost revenues due to closures that happen due to storm damage. Call your agent to see what is provided.

For my part, as I filed out of the restroom with the rest of the relieved customers at the pizza place, I was grateful. Grateful the building was still standing unharmed. Grateful for the cell phone in my hand that allowed me to immediately know that my other loved ones were safe. Grateful to know that my own house was still standing. My heart aches for those that weren’t as fortunate as I, and I will admit to a sour feeling of helplessness. I hope that this information will help at least one person. Call us if you need us. For those that are hurting, we will be here filing claims, answering questions, and praying for you.