North Carolina Home Insurance Premiums Set to Rise 15% by 2026
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| Homeowners Insurance North Carolina © Hannah Schoenbaum |
North Carolina Home Insurance Premiums Set to Increase by 15% by 2026
North Carolina homeowners are preparing for an average increase in home insurance premiums by approximately 15% by mid-2026. This significant rise is part of a settlement reached between the state's Insurance Department and the insurance industry. With insurance companies facing the challenges of rising costs and natural disasters, homeowners will experience substantial premium hikes, albeit not as steep as initially proposed.
Background of the Premium Increase
In January 2024, the North Carolina Rate Bureau, representing the state’s insurance companies, filed a request for a 42.2% increase in premiums. The industry argued that this increase was necessary due to the rising costs of building materials, inflation, and the financial strain caused by frequent natural disasters such as hurricanes. The state Insurance Commissioner, Mike Causey, rejected this request, leading to a lengthy hearing process and ultimately a settlement that will result in a more moderate increase.
The settlement establishes that insurance premiums will increase in two phases: 7.5% on June 1, 2025, and another 7.5% on June 1, 2026, bringing the total increase to 15%. This decision contrasts sharply with the original request from the Rate Bureau but still acknowledges the need for increased rates to cover the rising costs associated with extreme weather events and inflation.
Regional Variations in Insurance Premium Increases
One of the most notable aspects of the rate increase is the regional variation in how much different parts of the state will experience. Areas affected by severe flooding and storms in recent years will face steeper hikes, while less disaster-prone regions will see more moderate increases.
Coastal Areas and High-Risk Regions
The most significant increases will occur in the eastern coastal regions of North Carolina, areas that were severely impacted by Hurricane Matthew in 2016 and Hurricane Florence in 2018. These regions will face an average increase of 16% by mid-2025, followed by an additional 15.9% increase by mid-2026. For example, counties such as Carteret, Craven, and Brunswick will be heavily affected by the rate hikes.
Hurricane-related damage has caused significant financial strain on insurance companies, which are required to pay large sums for claims in these high-risk areas. With storm frequency and intensity on the rise, insurance companies are pushing for higher premiums to ensure they can cover future claims, leading to a more considerable impact on homeowners in disaster-prone regions.
Less-Affected Areas
On the other hand, regions that have experienced fewer natural disasters in recent years, such as the mountains and foothills of North Carolina, will see more modest premium increases. In counties like Buncombe, Watauga, and Yancey, homeowners can expect a 4.4% premium increase in 2025, followed by a 4.5% increase in 2026. These areas are less likely to experience the same level of storm damage, which is why the rate increases here are lower than those in the coastal regions.
Urban Areas
Large cities like Raleigh, Durham, and Charlotte will also see significant increases, but they will be in the middle range compared to the high-risk areas. In Raleigh and Durham, base rates will rise by 7.5% in both 2025 and 2026. In Charlotte, premiums will increase by 9.3% in 2025, followed by a 9.2% increase in 2026. These cities are experiencing growth and rising property values, which contribute to increased insurance premiums.
Factors Driving Premium Increases
Several key factors have contributed to the need for insurance premium hikes in North Carolina. These factors include the impact of natural disasters, the rising costs of building materials, and the increasing price of reinsurance.
Natural Disasters
North Carolina has seen an uptick in severe storms, flooding, and other natural disasters in recent years. Hurricanes Matthew and Florence, for instance, caused widespread damage across the state, resulting in significant payouts from insurance companies. As the frequency and severity of such storms increase, insurance companies need to raise premiums to ensure they can cover the costs of future claims.
Inflation and Rising Costs of Materials
In addition to natural disasters, inflation and the rising costs of building materials have played a crucial role in driving up premiums. The cost of construction has surged, particularly after the pandemic, with prices for materials like lumber and steel seeing significant increases. This inflation in the building industry directly impacts the cost of repairs and replacements for homes, which in turn leads to higher premiums for homeowners.
Reinsurance Costs
Reinsurance, which is the insurance that companies purchase to protect themselves against large claims, has also become more expensive. With an increase in catastrophic events, the cost of reinsurance has risen sharply. To cover the additional expenses, insurance companies are passing these costs onto homeowners in the form of higher premiums.
How the Settlement Helps Homeowners
While the 15% increase may seem significant, the settlement reached between the North Carolina Insurance Department and the Rate Bureau helps mitigate some of the more extreme rate hikes. The settlement structure ensures that the increase is phased in gradually, with the 7.5% hikes in 2025 and 2026 offering some relief to homeowners who would otherwise face a sudden and overwhelming rise in premiums.
Moreover, the settlement bars the Rate Bureau from requesting another increase before June 1, 2027, which provides a period of stability for homeowners who may be concerned about future rate hikes. This period allows homeowners to better plan their finances and adjust to the increased premiums.
The Role of "Consent-to-Rate" Policies
To prevent an exodus of insurers from high-risk areas, North Carolina has a "consent-to-rate" provision in its insurance law. This allows insurers to provide coverage to high-risk homeowners, but only if they agree to pay premiums up to 250% of the standard rates. This provision has helped maintain a level of insurance availability in disaster-prone areas, where some insurers may have otherwise pulled out due to high risks.
As of 2022, about 40% of homeowners in North Carolina had policies set by consent-to-rate agreements. While this system may mean higher premiums for those living in high-risk areas, it ensures that homeowners can still obtain coverage.
Preparing for the Rate Increases
As North Carolina homeowners brace for the upcoming rate hikes, there are steps they can take to manage their insurance costs.
- Shop Around: Homeowners should regularly compare insurance quotes to ensure they’re getting the best possible rate. Even with rate hikes, some companies may offer better pricing or discounts for bundling insurance policies.
- Consider Increasing Deductibles: By raising their deductible, homeowners can reduce their premium costs. However, this should be balanced with the ability to pay the higher deductible if a claim arises.
- Strengthen Your Home: Implementing measures to protect your home from storm damage, such as reinforcing roofs or windows, may help lower premiums. Many insurers offer discounts for homes with storm-resistant features.
- Review Your Coverage: It’s a good idea to periodically review your coverage to ensure it matches your current needs. Over-insuring your property can lead to unnecessarily high premiums.
Summary
North Carolina homeowners face a 15% increase in insurance premiums by 2026, phased in over two years. Areas affected by past storms, like the coast, will experience larger hikes, while other regions, like the mountains, will see smaller increases. The rising costs of natural disasters, inflation, and reinsurance are major drivers behind the rate hikes. Homeowners can take steps like shopping around for insurance or increasing their deductibles to manage costs.
Q&A Section
Q1: Why are North Carolina home insurance premiums rising?
A1: North Carolina home insurance premiums are rising due to increased storm activity, inflation, and the rising costs of construction and reinsurance. These factors have put financial pressure on insurance companies, leading to higher premiums.
Q2: How much will premiums increase in 2025 and 2026?
A2: Premiums will increase by 7.5% in 2025 and another 7.5% in 2026, for a total of 15%.
Q3: Which areas of North Carolina will see the largest premium increases?
A3: Coastal areas and regions hit hardest by Hurricanes Matthew and Florence will see the largest increases, with some areas experiencing up to 16% increases in 2025.
Q4: What is the consent-to-rate provision?
A4: The consent-to-rate provision allows insurance companies to offer coverage to high-risk homeowners at premiums up to 250% of the standard rate, ensuring availability of insurance in disaster-prone areas.
Q5: What can homeowners do to manage rising premiums?
A5: Homeowners can shop around for the best rates, increase their deductibles, reinforce their homes, and review their coverage to help manage higher insurance premiums.
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