Why Rates Change Even Without a Claim
It’s natural to wonder why your premium may rise when your home hasn’t changed much and you haven’t filed any claims. The reason is that insurance is driven by the overall cost of covering all policyholders, not just your individual property. When the cost to repair or rebuild homes increases across the state, insurance companies must adjust rates to ensure they have the financial strength to pay future claims, especially after severe weather events.
Think of it this way: insurance rates aren’t just based on what happened last year, but on what could happen in the future. Because Florida is one of the most hurricane-prone states in the country, insurers must be prepared long before the next storm season arrives.
The Rising Cost of Rebuilding Homes
One of the biggest factors behind insurance rate changes is the cost to repair or rebuild a home. Over the last several years, the price of materials and labor has increased significantly. This includes:
- Lumber and structural materials
- Roofing shingles and underlayment
- Drywall, plumbing components, and electrical systems
- Skilled labor such as roofing, carpentry, and general contracting
When these costs rise—even by a small percentage—it affects how much it would take to fully rebuild a home from the ground up. Insurance policies are designed to reflect today’s replacement cost (i.e., what it would cost to rebuild your home from the ground up), not the original purchase price of the home or its market value (i.e., what your home could sell for today). This ensures that if something catastrophic happens, you can restore your home to the same quality and safety standards as before.
As rebuilding costs increase, insurance coverage must follow suit, and that often results in adjustments to premiums.
Inflation and the Cost of Living
Inflation is another major contributor to rate increases. Everyday expenses—fuel, transportation, building supplies, utilities—impact the cost of doing business for insurance companies, contractors, roofers, and repair specialists. When inflation pushes these costs upward, claim payouts become more expensive, and premiums must keep pace to ensure coverage remains adequate.
Even modest increases in inflation can significantly affect insurance, because the home insurance industry is so closely tied to construction costs and supply availability.
Home Values and Insurance Coverage
The housing market in Florida has seen substantial growth, with many homes increasing in value over the past few years. While your home’s value increasing can be a financial benefit for you, the amount of insurance needed to protect your home increases as well. This doesn’t mean you’re paying more simply because your home is worth more on paper—it means the cost to rebuild that home to its current standard has increased.
Updating your home’s replacement cost is essential to ensuring you’re fully protected if a major loss occurs. This is another reason premiums may shift from year to year.
Property-Specific Factors That Affect Premiums
While many cost increases are statewide or spread across your community, certain aspects of your individual home also play a role in determining your rate. These can include:
Roof Age
Roofs naturally become more vulnerable to wind and weather over time. The condition, material type, and age of your roof are all factors that help determine your rate. For example, around the 15-year mark most roofs are considered at a higher risk for damage, which can increase your premium.
Home Updates or Improvements
Renovations, additions, or upgrades—such as building an extension, adding a new bathroom, or installing a pool—can increase the cost to rebuild your home and may result in changes to your coverage and premium.
Location and Local Building Costs
Where your home is located matters. An increase in local crime may increase your premium, especially if there have been several theft claims in your area that make your home’s location a higher risk. Even labor shortages, such as the reduced availability of local contractors, can impact local construction costs and therefore increase your premium, too.
How Your Insurance Score Affects Your Rate
Another factor that can influence your premium is your insurance score. This score is based on information that statistically predicts how likely someone is to file a claim. It is not the same as a credit score, but credit-based characteristics may be part of the calculation.
Factors that may influence your insurance score include:
- Timely bill or loan payment history
- Length of credit history
- Number of open accounts
- Outstanding debt
- Past claim history
Insurance scores help companies set fair and accurate rates. A higher insurance score can lead to lower premiums, while a lower score can contribute to an increase.
Reinsurance: A Major Cost Driver in Florida
One of the biggest drivers of insurance costs in Florida—though often the least understood—is reinsurance. Reinsurance is essentially insurance for insurance companies. It exists to ensure insurers can pay claims after major disasters like hurricanes.
Here’s the simplest way to think about it: If your insurance helps protect your home, reinsurance helps protect the entire insurance system.
Because Florida faces some of the highest hurricane risks in the country, reinsurance is more expensive here than in most other states. It’s also the single largest expense for insurers operating in Florida. Reinsurance spreads risk not just across all Floridians but globally, meaning that homeowners’ insurance rates on one side of the world can be impacted by major storms on the other side. When global or national catastrophes increase—hurricanes, wildfires, floods, or severe storms—reinsurance costs rise. Those increases affect insurers across the state and ultimately impact homeowner premiums.
Without reinsurance, the cost of home insurance in Florida would be significantly higher, and insurers would not have the financial backing needed to recover after major storms.
How Rate Reviews Protect You
Every year, Tower Hill reviews rates carefully to ensure they accurately reflect today’s risk environment and rebuilding costs. These proposed rates aren’t decided lightly; they undergo extensive actuarial analysis and must be reviewed and approved by the Florida Office of Insurance Regulation (OIR). OIR ensures that rates are:
- Adequate (able to pay future claims)
- Not excessive
- Not unfairly discriminatory
This regulatory process ensures fairness and accountability in how rates are set.
Our Commitment to You
We understand that rising insurance costs can be frustrating, and we’re committed to transparency in explaining why your home insurance rates change. Our top priority is making sure you have strong, reliable coverage when you need it most. With more than 50 years of experience serving Florida homeowners, we remain focused on protecting your home, your investment, and your peace of mind.
If you ever have questions about your coverage, premium, or ways to reduce your risk, contact your agent.