(The Center Square) – Imagine living in the same house for years, maintaining that house, and having no claims on your homeowners' insurance policy, and then seeing your premiums skyrocket.
That’s reality for many Washingtonians. The sticker shock notices many homeowners are receiving are not the result of rate changes approved earlier this year by the Washington State Office of the Insurance Commissioner; they are dramatic rate hikes from 2023 and 2024 that are only now showing up on many policyholder rate change notices.
“The notable figures here are in 2023; we saw a 16.6% rate increase. In 2024, it was 21.7%,” Aaron VanTuyl, with the agency’s Public Affairs division, told The Center Square.
That amounts to an average rate increase of more than 38% over two years.
“The big driver was just the cost of claims went up,” VanTuyl explained. “Insurance companies were spending a lot more money to get things repaired and get things fixed. There were building materials shortages, then labor shortages, all kinds of stuff coming out of COVID.”
Insurance premiums are calculated based on the overall risk and cost of replacing a home. Inflation, supply chain issues, and rising costs for construction materials and labor all contribute to increasing rates.
“Over the last few years, inflation has gone up. It has started to slow down, but we haven't seen prices go down,” said Janet Ruiz, director of strategic communication with the Insurance Information Institute. “When you go to [The] Home Depot to buy wood, those prices have not gone down, and the only way we can pay claims is if we increase our prices.”
Ruiz said another big issue that drives increased costs is legal system abuse or lawsuit abuse.
“Juries have decided to be extremely generous and give out some of these nuclear verdicts that are way above and beyond trying to make the person whole again,” Ruiz said, singling out Florida.
According to Insurance.com, “the Florida home insurance crisis is the result of several factors, including hurricanes and litigation, that have caused home insurance companies to pull back, leave the state or even go out of business. As new legislation starts to impact rates and new companies enter the market, the crisis appears to be easing.”
VanTuyl says that while homeowners are experiencing huge premium increases this year, it appears that, at least for now, things are leveling off.
“So far in 2025, the average rate increase we've seen is 3.1%, which is much more in line with what we've seen over the last few decades than the last two years have been,” he noted.
He explained that when policyholders are notified of a large premium hike, it’s natural to suspect price gouging, but he said that is not the case.
“Really, the profit margins are not that great for most of these companies,” VanTuyl said. “But they also have to have enough on hand to make sure that if there is a large number of claims that they can make people right. In Washington, I think the profit margin built in is around 5% for insurance companies. They have to [have] enough to cover their expenses, but not so much that it's price gouging.”
Ruiz advises people to shop around to see if they can find a lower premium.
"So, if you have a rainy day fund that's for any emergencies that come your way, then you can put more in your rainy day fund and have bigger deductibles on your auto and homeowners,” she said. “Meet with your agent, figure out if you can take higher deductibles, or which discounts you are not taking advantage of.”
According to Bankrate.com, in 2024, the U.S. property/casualty industry sustained more than $100 billion in natural disaster losses for the third time in the last four years. This included five landfalling hurricanes and more than $50 billion in severe convective storm losses for the second consecutive year.
The average cost of home insurance in Washington is $1,437 per year for a policy with $300,000 in dwelling coverage and a $1,000 deductible, according to Insurify.com. This is well below the national average of $2,377 for the same coverage levels; however, the average price for a home in Washington is more than $600,000, according to Zillow, so premiums would be higher.
While Washington law doesn’t require home insurance, most mortgage lenders require it.
