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It\u2019s not your imagination! From grocery shopping to car shopping to buying services and protections, consumers are experiencing what economists have named \u2018shrinkflation<\/a>\u2019.<\/p>\n Essentially, think of it as a hidden or \u2018glossed over\u2019 form of inflation. While industries are facing rising production costs, tariff-related bloat, increases in the cost of oil (needed to transport, sell, or manufacture goods), and labor shortages, they have employed sophisticated strategies to pass on these costs to consumers without triggering a price backlash.<\/p>\n More specifically, in the home insurance industry, costs are rising due to the growing frequency and severity of weather-related losses, the rising costs of construction materials and labor, and the aging housing infrastructure across the U.S. As with most industries, insurance companies understand that people are extremely sensitive to price increases, so they are altering coverage instead.<\/p>\n Home insurance shrinkflation manifests as the gradual reduction in insurance protection through cost saving measures that benefit the insurance company.<\/p>\n What people are seeing are renewals for last year\u2019s home insurance policy that look basically the same for the same price, but may have reduced benefits, e.g., more expensive deductibles, more restrictive endorsements and exclusions, and material changes in sub-limits and settlement terms.<\/p>\n On the surface, two homes can have the same total dwelling limits, e.g., $500,000, but can have very different premiums and claims payouts due to a difference in:<\/p>\n While national trends do not impact homeowners equally, insurance companies are responding to the worsening economic conditions they are facing to various degrees around the country. They are faced with rebuilding costs which are skyrocketing and the severity of claims that is getting much worse, even as the number of individual claims may not be climbing.<\/p>\n For insurance companies, working to mitigate their business risks involves a combination of:<\/p>\n It\u2019s worth noting that state insurance regulators are reviewing policy rates and requirements, but consumer protections differ by jurisdiction.<\/p>\n Yes, it\u2019s important to focus on all aspects of the policy, not just the annual premium. One way insurance companies are altering the coverage is by offering more types of deductible structures, which sounds like a good thing, but actually can create higher deductibles in some cases.<\/p>\nWhat is Home Insurance Shrinkflation?<\/h2>\n
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Why Does My Homeowners Insurance Cover Less Now?<\/h2>\n
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Is My Deductible Becoming a Larger Share of the Overall Loss?<\/h2>\n