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Home Insurance Costs on the Rise, Coverage Options Decrease

(5/2/2012) Home insurance rates are at a record high, and are expected to jump even higher in 2012, reported the Insurance Information Institute in March.

Homeowner insurance premiums are expected to raise 5% this year to an average of $1,004, the biggest yearly increase since the housing market collapse. The increase also marks the first time the national average premium is above $1,000.

The rising rates are one more challenge for American homeowners, many of whom face properties that are underwater and mortgage payments that are out of reach. Insurance companies cite these challenges as a primary reason for escalating premiums.

The Insurance Information Institute also reported that insured catastrophe losses in the U.S. totaled $35.9 billion in 2011, up from an average of $23.8 billion from 2000 to 2010. At the same time, insurers' return on investments have been at record lows, providing one more reason to increase prices to consumers.

While homeowners have always had the option to seek out different coverage and different rates when facing rising costs, that is becomingly increasingly hard to do. Across the board insurers are increasing premiums, and some companies are exiting the market all together. At the same time, the coverage offered by insurers is becoming increasingly limited, with companies charging additional fees for coverage that may have been standard in the past.

Overall, states are in charge of allowing insurance companies to raise their rates. That means premiums can vary widely from state to state, and each may have their own record amount of premium increase. Key states that are poised to post record-breaking rates are:

  • Georgia - Rates from GuideOne insurance are jumping 12% on average
  • Texas - Rates from Farmers Insurance are increasing 10% on average
  • Pennsylvania - Allstate is raising rates by 15%
  • Florida - Citizens Property Insurance Corp is increasing rates by 21%

The unfortunate side effect of increasing rates and decreasing insurance options is consumers make a big gamble with their home insurance. Many will raise their deductibles to get relief with monthly costs. But if damage or theft does occur, that means higher out-of-pocket costs. That can be an even bigger strain on strapped homeowners.

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