What Does the Pandemic Have to Do With Rising Insurance Premiums?
It seems that in the past two years, the answer to every question is the pandemic. From our travel habits to our school systems, everything about the way we live our lives seems to have been impacted by covid. Now, it seems that we can add something new to the list, something that many would not expect - rising home insurance premiums.
You may be asking yourself, “What does the pandemic have to do with my home insurance?” A large determining factor in what your home insurance premium will cost you depends on the replacement cost of your home. If the reconstruction cost of your home increases, so does your insurance premium. One of the consequences that we have seen in many industries, due to covid, is supply chain shortages. This is massively affecting the building industry. Things are taking longer to build and increased demand has stressed the supply chain, causing costs to rise. Add this to the fact that the cost of building materials has skyrocketed. Another piece of the puzzle is the dramatic labor shortages being felt in many industries, including the building and construction industries. Exasperating it all is the ever-rising inflation which is set to break records and is being felt all across the country. When supply and labor is down but demand and cost of materials are up, it simply costs much more to build. All of these pandemic-related consequences are causing home insurance premiums around the country to rise dramatically.
Of course these are not the only reasons for increased home insurance premiums. Increased number and intensity of catastrophic storms are also pushing premiums higher as more claims are being made and costs increase for insurance companies. This year, there were 18 weather disasters around the country, each causing $1 billion in losses. Insurance companies are feeling the pinch, with only three of the 52 local insurance agencies in Florida realizing profit in 2021. These losses will be passed down to policyholders.
Which states are seeing the highest premium jumps? The Insurance Information Institute reports that Louisiana, California, and of course Florida all saw premiums jump 20-30%! Some industry insiders see the spiking numbers as temporary, but many warn policyholders to re-evaluate the reconstruction cost of their property to ensure that their current coverage is adequate for today’s market. The Florida Keys real estate market is one that is even more vulnerable than most to the implications causing premium rises. If you own a home in the Keys, check with your home insurance company to make sure that you have enough coverage before you need to make a claim!
