It's always helpful knowing the context of a situation in order to better understand it. Here's a homeowners insurance example. Rates have been increasing industry-wide for the past few years, at least, in much of Middle Tennessee. Part of that is a reflection of more homeowners claims occurring than expected. However, another significant component is the fact that building costs have risen dramatically in the Nashville metro area, including Franklin, Brentwood, Thompson's Station, Spring Hill, and Nolensville.
How does this impact your homeowners insurance premium? Well, it's no secret that our entire area has been hot-hot-hot when it comes to people relocating here. This has dramatically increased demand for construction crews to build homes, condos and apartments to house them, not to mention commercial buildings to cater to them. When demand is high, this naturally causes the cost of labor and materials to go higher and higher.
Since insurance companies are in the business to make people whole after a loss, they pay to rebuild homes after disasters like tornadoes and fires. If we know the price of labor and materials is going higher and higher, where will your insurance company get that extra amount from? You guessed it, from you, and its other customers. Maybe you've noticed the "Reconstruction Cost" amount on your homeowners policy has increased during the past few years, meaning your insurance company thinks it continues to cost more and more to rebuild your home in the event of a catastrophe, based on local variables, like construction costs. That's just a consequence of living in a high-demand area.
On the other hand, who can forgot the recession in the late 2000's and beyond? During that time, hardly anyone was building, and you could get excellent pricing for construction crews and materials, due to little demand. During that time, some homeowners' Reconstruction Costs amounts on the policies actually decreased. So the reverse can be true.
Of course, this is a pretty simplistic explanation of just one aspect of home insurance pricing. A lot more is factored by those big black boxes at insurance company headquarters, to eventually determine your rates. However, I thought it might be helpful to give you a little context.
I'm always available to advise you on your personal and business insurance needs. Thank you so much for your support as I celebrate completing my 10th year in the business!
David Yates Insurance Agency
1881 General George Patton Dr., Suite 103
Franklin, TN 37067
Phone 615-778-1816 Fax 615-778-1817
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