Historic inflation and worsening weather patterns have resulted in spikes in the frequency and severity of homeowners claims, and the costs associated with resolving them.
In response, insurance carriers throughout the industry are making important updates to keep coverage affordable and accessible to all.
As a homeowner, you have a significant role to play in this effort. There are two ways you can start to make a difference. The first is through increased cost-sharing by updating your deductibles, meaning you'd pay more out of pocket if there is a loss but your rate may be more affordable. The second is home maintenance, which helps reduce your risk of experiencing a loss.
Inflation: what do you need to know?
Inflation may be leveling off, but currently, costs are not showing signs of decreasing.
Comparison against these costs in 2019:
Weather events: how are you impacted?
As weather patterns continue to worsen, claims are becoming more frequent, more severe and more costly.
separate billion-dollar weather and climate disaster events in the U.S. in 2022
separate billion-dollar weather and climate disaster events in the U.S. in the first half of 2023
most frequent homeowners claim is now wind/hail damage
Deductibles: what can you expect?
Like everything else, insurance premiums need to adjust to address these higher costs. As a result, customers can expect to see increases across the industry.
But these challenges cannot be resolved through premiums alone. Without your help, prices could be even higher. Deductibles will become a way to make home insurance accessible to homeowners and families. A deductible is the amount you agree to self-insure if you have a claim. A higher deductible means you pay more out of pocket if you experience a loss, but in return you receive a lower rate.
- Reasons to raise your deductible
For a long time, a common deductible on a homeowners policy was $1,000. This is the same as the standard deductible on an auto policy - despite the fact that a home has typically 10-12 times the value a car does.
As claims costs and severity continue to rise, homeowners should consider raising their deductibles from their standard amount.
Keep in mind that many homeowners may not experience a loss. This is why higher deductibles are becoming more common, and why they are a way to reduce the impact of rate increases and keep coverage affordable.
Plus, taking steps, like installing water sensors and undergoing regular home maintenance, can help protect your family from experiencing common losses, and avoid needing to use your deductible.
- Understanding wind/hail deductibles
A wind/hail deductible is an amount you pay - in place of your regular ("all-peril") deductible - if the cause of a loss is due to wind or hail damage. This is commonly based on a percentage of the home's covered value (listed as "Coverage A" on your policy).
$350K Coverage A with a
$2,500 all-peril deductible
and 1% wind/hail deductible
$2,500 all-peril deductible applies
$3,500 - 1% of Coverage A -
wind/hail deductible applies
* This example is provided for illustration purposes only. Please refer to your policy for the coverage provided.
With the recent rise in home repair costs, this deductible may help keep rates lower. And because this deductible is connected to the insured value of your home, it automatically adjusts as prices rise. This helps keep coverage up to date.
Home maintenance: what steps can you take?
Deductibles are only something you pay if you have a claim. So, why not take steps to avoid the disruption and stress that comes with experiencing loss?
Through regular home maintenance and loss prevention practices, you can greatly reduce your risk of having a claim – and lessening its impact if you do have one.
- The importance of monitoring devices
The second most common homeowners claim - behind wind and hail claims - is water damage unrelated to weather. But, unlike wind and hail, this is largely preventable through water sensor and shut-off technology.
You may not have devices like this in your home currently. But, do you have a burglar alarm? Or a smoke detector? These are much more common safety devices - despite the fact that water damage is a 6-7 times more frequent claim. Considering the cost and disruption associated with recovering from these claims, there's no reason not to stay protected against water damage.
Another increasingly common claim is electrical fires, which is why devices that monitor electrical activity in walls and temperature sensors are also becoming more widely used.
Both of these trends speak to the importance of installing safety technology in your home, to prevent avoidable claims from occurring. Plus, The Hanover has resources and partner vendors that can help you take these steps today.
- Staying on top of roof maintenance
As you think about roof coverage, consider your auto coverage. If you drive a 2016 car, and it gets totaled, you are typically covered for the value of a 2016 car, not a brand new model. With the frequency and severity of roofing claims soaring, a similar approach is taking place with roofing coverage.
This largely impacts older roofs, which are also especially susceptible to damage from weather events. That's why it's important that you take steps maintain your roof, no matter how old it is, by:
- Trimming overhanging branches
- Replacing shingles and sealing holes
- Keeping gutters clear to mitigate ice dams that could result in roof (and other) damage
Access valuable resources
The Hanover and your independent insurance agent will be with you every step of the way to help guide you through this evolution in homeowners coverage, to keep your home safe and your policy up to date.
Xactimate (through March 2023)
National Centers for Environmental Information
Hanover internal data
All products are underwritten by The Hanover Insurance Company or one of its insurance company subsidiaries or affiliates (“The Hanover”). Coverage may not be available in all jurisdictions and is subject to the company underwriting guidelines and the issued policy. This material is provided for informational purposes only and does not provide any coverage.
Propriety material of The Hanover Insurance Group Inc. © 2023 The Hanover Insurance Group. All Rights Reserved. Please review your policy for the coverage provided.