If you bought or are planning to buy your home by taking out a mortgage, you know there’s one thing you absolutely must have: Homeowners insurance. Your lender requires it because they need to know their money is safe if something happens to the property. Even if you don't have a mortgage, it’s not a bad idea to have insurance so you know your investment is safe.
But home insurance costs have soared over the past few years. On a national level, they increased by 35% between May 2022 and May 2023, with another 12% increase expected this year. In some states, however, insurance costs skyrocketed by more than 60% over the past two years. (I’m talking about you, Florida.)
Now, most homeowners who take out a mortgage roll the cost of homeowners insurance into the loan. Every time you make a monthly mortgage payment, it goes into an escrow account from which you pay the loan principal, interest, insurance and property taxes.
Whenever your insurance costs go up, your monthly mortgage payment will also increase because you must pay more for the policy (the same thing happens with property taxes). So, even if you have a fixed-rate mortgage with “predictable” monthly payments, you could find yourself paying several hundred dollars more just to cover the increases in homeowners insurance that we’ve seen recently.
But there is a way to potentially avoid having those big increases — or at least minimize their impact on your monthly payments. According to Travis Hodges, managing director at VIU by HUB, a digital insurance brokerage, you can shop around to “find a better value” even if you have included your insurance in the mortgage.
“You still have the option, and you still have the choice to find a better insurance value, whether you pay it into an escrow account or directly,” Hodges tells me.
So, if you’ve rolled your homeowners insurance into your mortgage and are seeing your monthly payments increase to the point where they’re no longer affordable, remember the old saying: It pays to shop around. That includes shopping around for a new insurance policy.
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