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I've had insurance on my Upper West Side co-op through the same national, reputable insurance company for over 17 years. Our rates go up a little bit every year. This year our rate is increasing 25 percent and our insurance broker cannot explain why. We are not in a flood zone and we've only had one claim. The broker found us a new policy with a different carrier—similar coverage, same deductible, and much less expensive. Why is there a difference? Is there anything we should consider before taking the new policy?
There are several factors that could prompt such a dramatic increase in your insurance rates, and switching providers may only provide a temporary fix, our experts say.
"First, insurance companies have to hold investments in bonds, and interest rates have stayed lower for longer than anyone anticipated, so they need additional income," says Jeffrey Schneider of Gotham Brokerage (FYI a Brick sponsor).
Interest rates have remained low in response to the Covid-19 pandemic and ensuing economic crisis, and what is favorable for borrowers can be burdensome for insurance companies.
Another reason your provider is raising rates could have to do with the number of claims filed in your area.
"This part of the country has been plagued with an increasing number of very costly water damage claims: pipe bursts, overflows, contractor errors, frozen pipe, clogged AC valves," Schneider says. "Not only is the direct damage expensive, but the cost of renting an apartment or staying in a hotel when repairs drag on is very significant as well."
Water damage claims amounted to $13 billion in costs for insurers in 2017, so even if you're not in a flood zone—or an older, leak-prone building—your rates could be affected.
You could offset the rate increase by raising your deductible or shop around for better rates, he says, but you may find that a different provider ends up raising your rates in the near future as well.
In fact, insurers do expect that rates will continue to go up, with no end in sight to the coronavirus outbreak or to the resulting economic volatility, the Wall Street Journal reports. Landlords are especially feeling the pinch, as insurance rates for multifamily buildings shoot up and many tenants are unable to pay their full rent.
And for homeowners whose rates aren't changing substantially, it's still a good idea to speak with your provider and see if you need to make adjustments to your coverage, especially if you'll be working from home for the long-term.
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