Home Insurance Rates Are Going Up — And These Groups Are Getting Gouged
Two sets of people are paying way too much for their policies, a new study shows.
The high cost of a low credit score
In the study, Matic found homeowners with low or middling credit scores were facing much higher premiums and much higher price hikes.
Those with the lowest scores paid an average of $300 per year more than people with great credit and saw an average hike of $85 this year.
| FICO Score | Avg. premium 2019/2020 | Avg. premium 2020/2021 | Change |
|---|---|---|---|
| Less than 580 | $1,327 | $1,412 | 6.4% |
| 580-669 | $1,237 | $1,304 | 5.4% |
| 670-739 | $1,164 | $1,208 | 3.8% |
| 740-799 | $1,082 | $1,133 | 4.7% |
| More than 800 | $1,061 | $1,098 | 3.5% |
What’s the connection? Many insurers rely on credit data to set the premiums you pay, as research suggests the factors that lower your credit score (debt, late payments, collections and bankruptcies) also increase your risk of filing an insurance claim.
While a few states don’t allow companies to use an applicant’s credit score when calculating their premiums, your insurer might still be allowed to tally up an “insurance score” based on similar data in your credit report.
If you don’t know your credit score — and you should, if you want to get a decent loan or save money by refinancing your mortgage — you can check it online for free.
You have a few options to boost a lackluster score, but the biggest factors are your payment history and outstanding debt. If high interest rates — like the kind on credit cards — are preventing you from reducing your debt, consider paying it all off with a low-interest loan.
Seniors struggling with high rates
While the over-63 age group isn’t paying the highest premiums — that fate falls to the 43-to-55 bracket — they are paying way more than they have to.
Matic found that seniors are overpaying by an average of $751 per year simply because they aren’t actively monitoring, reviewing and adjusting their insurance policies.
| Age bracket | Avg. premium 2020/2021 | Avg. savings 2020/2021 |
|---|---|---|
| Under 27 | $919 | $329 |
| 27-34 | $1,047 | $389 |
| 35-42 | $1,133 | $454 |
| 43-55 | $1,243 | $625 |
| 56-62 | $1,221 | $573 |
| Over 63 | $1,183 | $751 |
Some insurers do offer loyalty discounts to people who renew with them, but the savings are often miniscule compared to the benefit of shopping around for a lower rate.
One of the best opportunities for savings on a home policy is living in the home for more than 20 years, Matic says, and people who can capitalize should ensure their insurer is rewarding them properly.
And it’s not just seniors overpaying for their insurance coverage. Matic notes that even people younger than 27, who are paying the lowest premiums overall, could find savings of around $330 a year by comparing offers.
Save on your other insurance policies, too
The same comparison shopping technique can unlock savings on all kinds of insurance policies.
The Insurance Information Institute recommends comparing at least three quotes before settling on an offer. There’s a good chance you could find the same coverage for a better rate.
If you haven’t looked around for a better price on your auto insurance policy lately — even in the last six months — you could be overpaying by as much as $1,100 a year.
And how about your health insurance plan? You might feel good about your marketplace plan or coverage through work, but it’s worth investigating whether you can shave off a few hundred dollars every year.
Finally, the cost of life insurance can vary widely depending on your insurer and the type of policy you have. You might be able to find $1 million in coverage for as little as a dollar a day.
