It's Getting Costlier to Insure a Home

Some of the nation’s largest insurers are raising home insurance premium rates, or plan to soon, reports The Wall Street Journal.

For example, State Farm Mutual Automobile Insurance Co. says it increased home owner rates, on average, 7.3 percent, and in some states it raised rates even more. Other insurance companies also report higher rates--a company in Florida reports an 11 percent increase this year in premium rates and in Pennsylvania some areas have faced a 33 percent hike in rates.

So why are rates rising when many home owners are seeing their housing values dropping?

Experts say premiums are partially based on rebuilding costs, not a home’s appraised market value, The Wall Street Journal reports.

While rates have most stayed stable the last five years, they’re now on the upswing. In 2000, the average premium for home owners insurance was $508. In 2010, that grew to $807, according to National Association of Insurance Commissioners and Insurance Information Institute.

More premium rate increases are expected in the near future too, insurers say, due to the increased costs from natural disasters, such as the recent tornadoes that struck the South and even the earthquake and tsunami in Japan.

Source: “While Home Prices May Be Falling, Insurance Premiums Are on the Rise,” The Wall Street Journal (May 17, 2011)