Homeowners Insurance Costs Up Modestly
The cost of insuring homes is expected to rise by 2.8% in 2004, the smallest increase in five years, according to the Insurance Information Institute.
The projected increase represents a substantial slowdown from 2003, when homeowners insurance costs rose by an estimated 7.4%, according to the institute. The average cost for homeowners insurance this year is estimated at $608, up $17 from the 2003 average. Despite the small increase, the average broke the $600 mark for the first time.
"Small decreases in the frequency and cost of claims have helped improve insurer financial performance, resulting in a significant moderation in the cost of homeowners insurance in 2004," said Robert Hartwig, senior vice president and chief economist for the Insurance Information Institute.
Mr. Hartwig said that some of the increase reflects choices made by consumers themselves, as many households have taken advantage of low interest rates to purchase larger homes or make additions to existing homes that have increased insurance costs.
According to the institute, between 1990 and 2002, home insurers paid out an average of $1.17 in losses and expenses for every $1 they earned in premiums.
Between 2000 and 2002 alone, insurers paid out an estimated $13.5 billion more in claims than they collected in premiums, rivaling the $15.5 billion in insured losses from Hurricane Andrew, which remains the most expensive natural disaster in history.
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