This is a question I get all too often from clients. It does seem too arbitrary and…even sneaky if you do not understand the factors creating the increase.

Did you know that you have an insurance score much like a credit score and any of these following factors can affect it, thusly affect your home and auto premiums:

• Adding an addition to your home.
• A negative change in your personal credit score.
• Filing a claim.
• Neighborhood increase in property value.
• Home goods rising in manufacturers’ cost.

I will list, in my opinion, the factors that most affect your home premiums the most to the least.

Inflation

As inflation increases, insurance companies respond by raising rates. That’s because the cost of items in your home will cost more than they did last year. As the price for appliances and equipment escalates, rates will adjust as well. The insurance industry references the Consumer Price Index to measure inflation and adjust rates accordingly. It’s one big reason why property owners find that their home insurance keeps going up year after year, even if nothing’s changed on their property.

“Attractive Nuances” (Insurance term for property changes)

When you put an addition on your home, you’re right to expect that its value will increase as a result. One factor in building a homeowner’s quote is your home’s square footage. When property changes occur that boost your property value, you may see a homeowner’s insurance increase.

If you’ve made big investments into home improvement and updated your kitchen, it’s going to cost more to replace those expensive new items — per square foot — compared to what you had in the kitchen before. That’s one of the reasons why you’ll see a rate increase, but it doesn’t mean that you’ll find homeowners insurance increases every year.

When your property has a swimming pool or trampoline, insurance companies consider these “attractive nuisances” that can pose a higher risk than homes without these items. Even backyard playsets can fall into this category. When attractive nuisances are added to your property, you may find a rate increase as a result.

That’s because if someone injures themselves in the pool or on the swing set, you could be held liable. But if you’ve taken measures to mitigate injuries such as installing a fence around a pool, this may help reduce the rate increase.

Filing A Claim

The purpose of insurance is, to offset the cost of major expenses if the unexpected should happen. When it does, you’ll be glad to have coverage for said unexpected. However, if you file a claim on your homeowner’s policy, your rates may increase.

When something happens, you may ask yourself, “How much will my homeowners’ insurance increase if I file a claim?”

Given that claims range from the small (think replacing sheetrock from a leak) to the large (think replacing your roof and the decking underneath after a major windstorm). It can depend on the total cost of the claim. If you’re thinking about filing a small claim — that may not cost you much more than your deductible — it could be smart just to pay it out-of-pocket. Remember, I ENCOURAGE YOU to always speak to your agent with any questions. They’re a resource you can trust to help you assess whether the type of claim you’re considering is worth filing.

Property Values in your neighborhood and or construction cost due to large weather-related impacts

When a home is impacted by severe weather, you may need to rebuild your home or even replace it altogether. Unfortunately, when catastrophic weather hits, many homes in a given area can be impacted, which may force a spike in the cost of construction materials. Laborers are in higher demand in those areas, and their rates, typically, escalate in the aftermath of hail, fire, or tornado. If you’ve got an older home, the cost of getting your home to be rebuilt according to modern building codes can be costly.

Your Insurance Score Dropped

A key component used to develop your total premium is your insurance score. It’s a calculation based on your likelihood of filing a claim during a given coverage period. Fortunately or unfortunately, your credit history is actually part of that calculation. Databases that hold details on previous property claims are used to factor your premium. These are some of the same factors that go into building your auto insurance score, as well. One of the databases used also contains your credit score and there have been correlations between people with lower credit scores and false or misrepresented, claims.

 So what can you do as a consumer to mitigate some of these?

If you have an agent that cares more about your education, knowledge and not sacrificing coverage in an effort to win you over strictly on price, you will be able to be as involved as you wish to be in how your money is spent and what you are truly getting for your money. It can seem as though it would be tedious to know ALL OF THE OPTIONS available, it isn’t actually. You’d be surprised how quickly and thoroughly you can know all options available. It is so much better to not have coverage that you knowingly decline rather than not have been told at all and pay the price when it comes time to file a claim.