Insuring a Seattle-area home now costs more. Here’s why

Homeownership comes with its surprises — a flooded basement, a busted furnace or a fence damaged by a fallen tree. And when surprises strike, the first question often is: Will my home insurance cover it? But recently the cost of home insurance itself has shocked Washington homeowners.  

With some seeing their premiums increase as much as 40%, homeowners are left with questions — and squeezed budgets.

“It is incredibly frustrating,” said Jenny Shannon, a 40-year-old officer in a health nonprofit. Shannon’s annual insurance premium on two policies protecting her North Beacon Hill condo has gone up nearly $1,700 this year.

“I can’t afford it right now,” she said. “I’m a single mom to a toddler and, with the cost of child care and the cost of living in Seattle right now, I just don’t have the room in my budget to accommodate unexpected increases like that.”

Shannon said she has let one of her policies temporarily lapse while she figures out how to juggle her expenses.

Home insurance, required until a mortgage is paid off, can be paid directly by the homeowners or rolled into a monthly mortgage payment. Combined with other escalating costs, such as auto insurance, groceries and taxes, this increase is just one more strike to some homeowners’ budgets. For homebuyers, it is another cost on top of high rates and rising home prices that is likely to increase their monthly payment and reduce their purchase power.  

“I was shocked,” said retired journalist Jonathan Nesvig, who was notified this spring that the premium on his North Tacoma home would increase 41% to $1,462 annually. Nesvig hasn’t filed recent claims on the 1922-built house where he has lived for nearly a half century.

His agent told him only that insurance rates have gone up because the insurance companies are trying to stay profitable. 

“I thought, ‘My goodness, it must be a mistake,’ because I’ve never paid anywhere near that much,” Nesvig said.

Shannon said she was hit with a double punch. First, her condo association was notified that the building-wide policy that covers the common areas and building would nearly double, increasing the cost for each of the owners in the range of $1,123-$1,986 annually. Shannon’s annual increase will be $1,435.

Then she learned this spring that her private insurance, known as an HO-6 policy that covers the interior of the two-bedroom condo and valuables, would jump 80%, from $573 to $1,000 annually.

She was able to get the quote down to around $800, by reducing her coverage. The added monthly cost of both policy increases is about $140, Shannon said. She said she’s yet to renew the HO-6 policy.

“So, my condo is not insured at the moment,” she said. Shannon said she does have a mortgage but pays her insurance upfront.

The cycle of inflation

In Washington, the cost of insurance for single-family homes jumped on average more than 16% in 2023 and nearly 12% this year, according to the state Office of the Insurance Commissioner, the regulator that approves rate increases. The state doesn’t have data available for condo insurance but the factors driving up rates for detached homes are likely similar, according to a spokesperson for the insurance commissioner.

Seattle insurance broker Toni Matous said she has been getting calls lately from homeowners upset about higher rates.

“People don’t like insurance in the first place, and then when they’re having to pay a lot more money for it, they really don’t like it,” she said.

Behind the increase are several factors from inflation to insurance cost and wildfire risk.

Inflation is a main factor. It has been more expensive to repair and replace homes because of the higher prices for lumber, material and labor.

“Everything in our economy is going up,” said Mark Sektnan, vice president for state government affairs for the American Property Casualty Insurance Association. “I’m not sure why we’re surprised to see that insurance is going up.”

Seattle insurance agent Dave Newman said claim costs have also likely increased because damaged homes today are bigger and more expensive to replicate.

“A lot of the houses today are monsters,” Newman said. “They’re 3,000-4,000 square feet and they don’t just have gas, heat, plumbing and electric. They have air conditioning and fiber optics, and they have complicated systems that drive up the cost of construction and the cost of replacing a house that gets burned down.”

Catching up

The premium hikes of the last couple of years also make up for years of small increases.

Rates haven’t been adequate to cover the exploding costs of claims, and most insurance companies are losing money. Insurance companies have been playing catchup with premiums, Sektnan said.

Nationally in 2023, Sektnan said, insurance companies paid out $1.11 in claims for every $1 collected in premiums — in other words, a loss of 11 cents on every dollar collected.

Home claims in Washington rose by 22% to $1.36 billion in 2021, by 35% to $1.84 billion in 2022 and are expected to top $2 billion for 2023, according to the insurance commissioner.

Home premium increases, though, were relatively flat before last year. Rates rose an average of 3.9% in 2022. The average increase was under 2% for five of the six years from 2016-21. These figures represent the weighted average increase to the base rate for the top 20 insurance companies writing home policies in Washington.

Sektnan said it can take an insurance company writing policies in Washington a year to gather the state-specific data to justify a new rate plan, get approval by the regulator and roll it out in the marketplace.

 It is unclear when insurance rate increases will level off, Sektnan said.

Climate risks

Extreme weather and wildfires are another factor. Insurance companies can’t charge Washington homeowners higher rates because of out-of-state disasters, like tornadoes in the Midwest. However, storms and wildfires that cause damage in Washington can affect rates, said Aaron VanTuyl, a communications manager for the insurance commissioner.  

Last summer’s fires near Spokane, for example, wiped out more than 350 homes. VanTuyl said that destruction will increase claim costs this year and could potentially be used by the affected insurance companies to justify higher base rates, affecting all their policyholders in Washington.

Unlike in other states, insurance companies haven’t pulled out of Washington, however. The state-mandated FAIR plan, which makes insurance available to homeowners who are unable to obtain it privately, had about 150 homeowners’ policies in the program last year, according to the insurance commissioner. By contrast, Florida has about 1.3 million policyholders and California 350,000 on equivalent insurance-of-last-resort plans.

Homes at wildfire risk in Washington have been dropped, however. Stan Morse, an attorney who lives in a hilly neighborhood a couple of miles from downtown Chelan in Central Washington, said his insurance company dropped his home this spring after a fire-risk evaluation.

There have been wildfires in the Chelan Valley. Morse said firefighters evacuated him as a precaution during the Chelan Butte fire in 2015 after knocking on his door at 1 a.m.  

Morse found another private carrier, but his premium increased 77% for less coverage. The old policy covered his $400,000 home for $1,239 annually. His new policy is charging $2,199, with a higher deductible of $2,500, up from $1,000 in the old policy.

He said he wasn’t happy that his longtime insurance company dropped him or about the added cost. He mounted a sprinkler on his roof on the afternoon the 2015 fire arrived in Chelan and has been careful to clear away dead leaves and remove vegetation near the home.

“I understand the risk from fire, and I worked really hard to eliminate it,” Morse said.

Costs of “reinsurance“

Insurance companies are also paying more for “reinsurance,” which is bought as a hedge against catastrophic losses by reducing their exposure to large claims. Insurance companies are “getting less coverage for a higher cost, which is very similar to what a lot of consumers are seeing as well,” said Kenton Brine, president of the Northwest Insurance Council.

Companies have also tried to reduce the frequency of claims by shedding risky policies and taking a harder line when writing new business.

“The underwriting is being drilled down on harder than I’ve seen it in the last 30 years,” Seattle broker Matous said. “They want the roof updated, they want to make sure that the property’s in good shape, maintenance, paint, all of these things are critical to getting a better rate than what you have right now.”

How to reduce the costs

Despite the tough market, it is possible to save money.

Jeffrey Flogel, a corporate finance manager who owns a 2,900-square-foot house in Seattle’s Central District, said raising his deductible shaved $576 from the quoted $1,838. He increased the deductible to 2% of the home value instead of $1,000, and that got the premium down to $1,262.  

“It basically makes my policy a catastrophic, like for fires and that kind of stuff or if a tree falls on my house,” Flogel said. He has seen a big increase since COVID, however.

“This is a policy that used to cost $700,” he said.

Matous said that people need to start viewing insurance as protection against heavy damage or a total loss and avoid making small-dollar claims that can be easily covered by savings.

“We are getting to the point, and I just don’t mean in Seattle or in the state of Washington, I mean nationwide, where people have to start looking at their insurance policies as more catastrophic buys,” she said.

Matous said she usually succeeds in talking people out of doing something rash, like switching companies to save a few bucks temporarily. A couple of months later, she said, you could end up paying more with a new company or get dropped more easily.

But it isn’t always easy to persuade people.

“We’re not the most popular people right now,” she said.