State Farm will soon hike insurance rates on Illinois homeowners by more than 27%.
That is effectively adding $746 to the average policyholder’s annual premium. For comparison, the average homeowner’s insurance costs are roughly $2,110 a year, or about $176 a month, according to a May analysis by NerdWallet.
Illinois Gov. JB Pritzker criticized the insurance giant’s move, saying he is “deeply concerned by State Farm’s unfair and arbitrary insurance rate hike.”
“These changes will cost Illinois homeowners hundreds of additional dollars per year without a state-based justification or corresponding increases in protection,” he said in a statement.
The upcoming rate increase, which starts on Aug. 15, comes as the U.S. is contending with affordability issues in its housing market, making it difficult for people to purchase homes.
Millions across the country already lack home insurance coverage, putting them at risk in the event of a disaster. Specifically, 11.3 million U.S. owner-occupied homes are uninsured, according to the latest LendingTree study.
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But State Farm said the uptick in costs reflects the risk the company sees in the state.
The company said home insurance claims costs are exceeding premiums collected in the state, and that last year, those total costs amounted to $1.26 for every dollar in premium it collected.
“Such losses are unsustainable,” the insurance giant said. Additionally, the costs of materials and labor have risen, which is further driving up costs to repair or rebuild homes.
The company also blamed the increase in the number of damaging storms, saying it paid more in hail damage claims in Illinois than any other state except Texas.
“The core promise of homeowners’ insurance, that your insurer pays your claim according to your policy, only works if the policy’s rates match the underlying risk. Accurate, risk-based pricing makes sure that insurers like State Farm can pay claims during some of life’s toughest moments for policyholders,” the company said.
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Redfin chief economist Daryl Fairweather told FOX Business that although Illinois doesn’t get hurricanes or wildfires, homes in the state still have climate risks.
“Severe thunderstorms that bring hail and high winds are becoming more of a problem for both homeowners and insurers, along with other disasters like flash floods and derechos,” Fairweather said.
She agreed with the company, noting that the rising cost of home repairs has also risen after disasters due to inflation. On top of that, immigration crackdowns are making it more expensive to hire laborers, further driving up insurance costs, according to Fairweather.
Original article source: State Farm to hike home insurance rates by 27% in this state
