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Homeowner's insurance quotes are rising fast. Here are tips for buyers and owners to cope

Even if you can afford to buy a home these days, Americans must ask themselves if they can afford to insure it.

Nearly 30% of American homeowners are nervous about rising home insurance rates, according to insurance comparison site Insurify.

Home insurance prices jumped 19%, or on average $273 per policy, last year, according to a study by Guaranteed Rate Insurance. The insurer said prices surged 55% from an average of $1,108 in 2019 to $1,723 in 2023. And more increases may be on their way. Insurify forecasts some increases this year as high as 23% in states with severe weather.

“Affordability is becoming an issue in a great number of parts of the country,” said Bill Gatewood, national personal insurance practice leader at insurance broker Burns & Wilcox. “Some parts have difficulty even getting insurance.”

Why is my homeowners’ insurance going up so much?

The two main reasons are:

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Inflation: The cost of everything related to homebuilding and repairs, like materials, parts and labor, has risen.

Weather: Weather-related events have increased in frequency and intensity. For example, 2023 saw record-high summer temperatures and 28 separate weather and climate disasters costing at least $1 billion, the highest number of billion-dollar disasters in a calendar year. And before that, 2022 was a record year for tornados, the National Weather Service said.

Which states have the most expensive home insurance?

The states with the highest home insurance costs are prone to severe weather events. Arkansas, Florida, Louisiana, Mississippi and Texas are vulnerable to hurricanes, Insurify said. California, Colorado, Nebraska and Texas face growing wildfire risk, it said. Kansas, Nebraska and Texas are highly vulnerable to tornadoes.

The top three most expensive states, according to Insurify, are:

◾ Florida averages $10,996 annually, and that cost is expected to rise by 7% to $11,759 this year.

◾ Louisiana’s annual average is $6,354, which is seen rising this year by 23% – the largest predicted increase among states to $7,809.

◾ Oklahoma averages $5,444 per year, and that’s forecast to increase 5% to $5,711 this year.

Should I avoid buying a home in these states?

Not necessarily. Home insurance is “very street specific,” said Paul Gallagher, senior vice president at insurance broker NFP, an Aon company.

Instead, “when you get an address for a house you’re looking at and considering putting an offer in, put in some research before getting the mortgage application,” he said.

Talk to your insurance agent to check the home’s flood zone, wildfire, or earthquake risks. Your insurance agent can determine if the home is insurable if you’ll have to go to a state insurer, and how high the premiums may be.

Should home insurance costs dictate if I buy the house?

Ask your insurance agent for options and loop in your financial adviser to create a plan to pay for it, insurance experts suggest.

For example, you’re in Florida and annual insurance costs $25,000, with $20,000 of that expense for wind exposure. If the home has new shutters and a new roof, you might consider setting aside some of your own money to pay for potential damage and save $20,000 in a given year.

“It’s very risky, but more people are doing it,” Gallagher said. “It’s usually a very high deductible for wind anyway, so damage has to be significant” before insurance applies.

Your financial adviser can look at your assets and cash flow and help you decide, “what to do in that case or suggest taking the savings and put it into an account and invest it” so there’s money there to pay for any potential damage, he said.

Check out the list: Best homeowners insurance companies of May 2024

What are ways to reduce the cost of a homeowners insurance policy?

Shop around. “Homeowners often lock in a rate and insurance company and don’t shop around,” said Michael Maerten, chairman of the board of Tri-County Suburban REALTORS, a local realtor association. “They should get a comparison rate every year.”

Higher deductibles will lower your premiums, Maerten said. Guaranteed Rate said in its study that the share of Americans taking deductibles between $5,000 to $10,000 jumped 49% between 2019 and 2023 compared to slight declines for those taking $500 to $2,500 deductibles.

If you have wind or hurricane coverage, consider a percentage deductible, which calculates your deductible based on a percentage of the value of your home. “Every year the value of your house goes up, so it takes the deductible higher,” Gatewood said. Guaranteed Rate said it’s seen 1% to 2% percentage deductibles increase by more than 200% between 2019 and 2023, while 2% to 5% deductibles have surged by 3,000%.

Bundle. Consider using one insurer for auto, home and possibly, even life, because companies often offer discounts for more than one policy.

Update your house. “This is more important now than it used to be,” Gallagher said. “The age of the roof, water heater, furnace, electrical and plumbing – if they’re old, they could disqualify you for insurance from certain insurance companies.”

Clean up or fortify your house. If you live in an area prone to wildfires, don’t allow tree limbs to hang over the house or flammable mulch to accumulate. If you live in an area with hurricanes, install shutters.

Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at mjlee@usatoday.com and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday morning.   

This article originally appeared on USA TODAY: Homeowners insurance costs surge. What owners and buyers need to know.