Why are home insurance rates up? What can I do about it?

By: Dan Toy, Vice President and Insurance Manager of First International Insurance

First International Insurance and its independent agents are separate from our banking, investment and other services, yet the insights affect the overall financial health of individuals and families, so we’re sharing some timely insurance information here. 

If your home and/or property insurance rates have gone up, you’re not alone. And, yes, you can get the coverage you need for reasonable rates.

First, understand that rates are up partly because insurance companies are paying out more in claims due to severe weather and related disasters.

In fact, the Insurance Information Institute explains that events like “hurricane Irene, the Joplin tornado that was the single biggest insurance event in Missouri history, and widespread winter storms, tornadoes and flooding have made the past decade one of the costliest in terms of natural disasters in U.S. history.

“Since insurance companies bear a large portion of that cost, it only makes sense that they may need to charge higher premiums to pay for all the claims they’ve been receiving.”

We’ve also seen many insurance companies require packages for coverage, too, instead of covering just a home, or just an automobile.

Lower costs, upgrade coverage
It is possible that you could lower your home insurance costs and upgrade your coverage. Here are key areas we consider:

Home Insurance

House – Replacement cost vs. market value
How much home insurance should you have? When you buy a house, the mortgage holder generally requires you to insure it prior to closing. Most consumers assume the amount of dwelling coverage will be equal to what they paid for their house. In some cases, this is incorrect.

Insurance companies don’t care about market value, which is what your house is actually worth. Insurance companies use the replacement cost value, which is what it would cost to rebuild your house in the same spot, same size and same quality of construction, at today’s costs. For instance, an older home in a rural community may have a market value of $120,000, but the exact house in a nice suburb may have a market value of $380,000. However, the cost to rebuild the house is the same in either location. Your insurance should cover the house for the full replacement value. Think of it this way: your insurance company will pay you to build a new home, not buy one down the street. Another consideration: Most of a lake home’s value is in the land; not the actual house on it.

For insurance purposes, insure your home to 100% of its replacement cost. We’ll help you do this—and revise it as you make home improvements, additions or other enhancements that change the replacement cost of your home. (Bonus: these typically also increase your market value. But remember, we’re not so concerned about that!)

Stuff – Replacement cost vs. cash value
This applies to pretty much everything in your house. Payment based on the replacement cost is usually the most favorable figure from your point of view, because you receive the actual cost to replace the property. For example, if your TV is stolen or destroyed, a replacement cost policy reimburses you the full cost of replacing it with a new TV (even if yours was outdated).

Specials – Jewelry, oriental rugs, home office equipment and of course WATER
Some items in your home have additional value that requires a rider, or mini-insurance policy for protection. Things like valuable jewelry, oriental rugs and home office equipment. We’ll help you find a reasonable rider for these items.

And when it comes to home insurance, if you have your basement/lower level finished, you should have separate water backup coverage in case of leaks, sump pump failure or, on another level, water damage to your roof. This is also a rider. Flood insurance, however, requires coverage through a national program—we can steer you in the right direction for that.

Activity – Home injuries covered
What if a neighbor falls at your house and hurts his back? Or a neighborhood child slips in your driveway and injures her ankle? A standard component of most home insurance policies is medical payment coverage. It covers medical costs if, heaven forbid, someone is injured on your property (and does not sue you). The typical coverage is $1,000, which doesn’t stretch very far these days, so it’s a good idea to increase that coverage to $5,000 or $7,000.


We shop, you save
We’re independent agents, and we have close working relationships with dozens of insurance companies, so we can provide exactly the coverage you need—nothing you don’t—at rates that fit your other financial goals.

Three-year checkup
Since the core idea of home insurance is to protect what you do have at rates you can afford, it’s a good idea to have a home insurance, or habitational insurance, check-up at least every three years—or if you get married, have a child, start a business or have another significant life change.

It’s a painless checkup, we promise, that just may save you money. Call us at (701) 293-5910, and we’ll find the right representative to fit your needs, whether we’re helping you with insurance now or you’d like to consider working with us. We look forward to bringing you peace of mind—that’s when we know we’ve succeeded!

See more about our insurance services.

Dan Toy - First International Bank InsuranceDan Toy served 20 years in the US Army before launching a second career in insurance. While in the military, he earned an Associate in Arts degree from Campbell University, a Bachelor in Science in Business Administration from Franklin University, and a Masters in Business Administration from Touro University. He currently works at First International Insurance as the Insurance Manager. In his free time, Dan enjoys golf and traveling. He and his wife, Amy, consider London one of their favorite destinations.

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