In fact, excluding additional discounts received in 2009 and 2010, which helped dampen the rate of growth, my premiums spiked by 17.5% in 2008, by another 16.8% in 2012, and finally by a backbreaking 20.4% this year.
Had it not been for those additional discounts, my homeowners premiums would have averaged 18.2% over the period. Yet, even with a generous discount, my premiums have ballooned by 65.3% since 2007. Now compare that to inflation, which rose by just 13.7% during the same period (via Dollar Times).
So in other words, from 2007 to 2013, my homeowners premiums grew 377% faster than inflation. But don’t just take my word for it. A May 2013 article by the Associated Press (AP) confirms that homeowners insurance rates have spiked, however it fails to mention why? More specifically, why homeowners insurance premiums are currently advancing 691% faster than inflation.
Of course, the insurance industry blames increasing replacement costs (the cost of rebuilding a home from the ground up). Okay, great! But that only accounts for a 2% to 3% annual increase. So how does this translate into an average annual premium spike of 18.2%? According to the aforementioned AP article, which I might add is based on antiquated data, “Nationwide, an average homeowners paid $909 for homeowners insurance coverage in 2010, up 36 percent from 2003. Inflation rose 19 percent during the same period.” It goes on to provide a list of what homeowners in states bordering the Atlantic Ocean or Gulf of Mexico were paying in 2010.
Following are the average costs in five of those states, ranked by the percentage change from 2003 to 2010:
- Florida: $1,544, up 90.6 percent.
- Alabama: $1,050, up 54.2 percent.
- Mississippi: $1,217, up 53.5 percent.
- South Carolina: $997, up 48.4 percent.
- Georgia: $833, up 46.1 percent.
It’s not the miniscule annual dollar increase that bothers me, but rather what the cost will be 10 or 20 years from now. At the current pace, by the time I reach what used to be considered retirement age, God willing, which is less than 20 years from now, homeowners premiums will be simply outrageous, perhaps more than 4 times the amounts shown above (i.e. doubling about every five years). In other words, if this doesn’t stop soon, I could be paying around $3,500 a year in retirement. I’m sorry, but this is just unacceptable.
So what did I do? I requested quotes from several local insurers. And what did I find? I received some quotes for less than half my current rate, some 30% to 40% lower, and others around the same. So I struck a deal which comes in at just 64% of the proposed renewal rate. That puts my new rate just 5.7% above what it was in 2006. Now that’s more like it.