US Home Insurance Premiums Soaring Faster Than Inflation

[Asia Economy Reporter Seulgina Jo] In the United States, which is suffering from inflation, home insurance premiums are rising faster than the inflation rate.

The Washington Post (WP) reported on the 26th (local time) that costs related to home insurance are increasing due to rising lumber prices, supply chain disruptions, and climate change.

According to the Insurance Information Institute (III), the annual premium that homeowners must pay when renewing insurance recently reached $1,398, up 4% annually on average. Since 2017, home insurance rates have surged by an average of 11.4%. WP stated, "This means home insurance premiums are rising faster than inflation," and added, "Insurance experts expect premiums to remain at high levels."

By state, Colorado showed a remarkable increase in home insurance premiums, rising an average of 21% annually from 2017 to 2020. During the same period, Texas recorded an 18% increase. Other states include Maryland at 13.4% and California at 9.6%. In contrast, Washington D.C. saw only a 3.2% increase, and West Virginia 3.1%.

Ken Hogland, who lives in West Virginia in the U.S. Midwest, said, "I recently found out my mortgage increased by $100, so I contacted the mortgage company, and they told me, 'It costs more to insure your home,' and advised me to talk to the insurance company." According to Bankrate.com, homeowners in the U.S. spend about 1.91% of their household income on home insurance on average.

The recent rise in home insurance premiums in the U.S. is analyzed to be due to increases in lumber prices, supply chain disruptions, and climate change. In March, when the spread of COVID-19 was severe, lumber prices once soared to $1,500 per 1,000 feet, which is a 400% increase compared to the previous year. Additionally, the Biden administration doubled the tariff rate on Canadian lumber to 18% last November. Canada is one of the largest trading partners, accounting for 30% of U.S. lumber supply.

WP emphasized that especially after the COVID-19 pandemic, supply chain disruptions combined with shortages of skilled labor and inventory, and overall inflationary pressures are intensifying. According to a survey by the National Association of Home Builders (NAHB), inventory shortages have been more pronounced than ever since 1990, with appliances and lumber being the most scarce items. Robert Dietz, chief economist at NAHB, said, "We are monitoring trends in items related to home construction based on the Producer Price Index, and prices are rising about 19% annually."

Climate change is also considered a factor in the rising home insurance premiums. The estimated insurance losses in the U.S. due to tornadoes, hurricanes, and wildfires are expected to reach $82 billion this year. Dale Porfilio of III said, "Climate change is putting pressure on everything related to weather," highlighting the increasing severity of hurricanes, wildfires, and tornadoes. Dietz, the chief economist, mentioned, "When hundreds of thousands are affected by natural disasters, the prices of building materials tend to rise for about 6 to 9 months."

This content was produced with the assistance of AI translation services.