Why your homeowners insurance premium keeps increasing 

In this article: 

• How policy changes can increase your premium 
• How homeowner insurance premium increases affect your mortgage payment 
• How to help manage rising insurance costs 

Many homeowners are surprised when their homeowners insurance premium increases from one year to the next. Because insurance is paid through your escrow account, those increases can raise your total monthly mortgage payment as well. While higher premiums can feel frustrating, they are often driven by factors outside a homeowner’s control and reflect trends across the insurance industry. 

This guide explains why homeowners insurance premiums have been increasing for many members, how these changes affect your escrow account and what steps you can take to manage the impact. 

Why homeowners insurance premiums are increasing nationwide 

Insurance companies regularly review risk factors and adjust rates based on claims, repair costs and economic conditions. In recent years, several overlapping factors have caused premiums to rise more sharply. 

Rising construction and repair costs: The cost of materials, labor and rebuilding homes has increased significantly in recent years. Insurance companies raise premiums to keep up with the higher cost of repairing or replacing a home. 

Increased weather-related claims: Storms, heat waves, wildfires and flooding events have become more frequent and more severe. As insurers pay more claims, rates increase for everyone in the region. 

Higher reinsurance costs: Insurance companies buy insurance themselves, known as reinsurance. As reinsurance becomes more expensive due to global claims, these costs get passed along to homeowners. 

Inflation: General inflation increases the cost of everything involved in repairing a home, including appliances, lumber, roofing, plumbing and HVAC systems. 

Updated replacement cost estimates: Insurers periodically reassess what it would cost to rebuild your home. If replacement costs rise, your coverage amount must increase too, which raises premiums. 

These broad economic and environmental changes are affecting nearly all homeowners insurance providers, not just a few. 

How policy changes can increase your premium 

Even if market conditions aren’t the primary cause, changes to your specific policy can also raise your premium. 

• Coverage updates: If your insurer increases your dwelling coverage to match updated rebuilding costs, your premium will rise. 
• Claims history: If you’ve filed recent claims, your insurer may adjust your rate. 
• Deductible changes: Lower deductibles generally lead to higher premiums. 
• Protective device credits: If discounts expire or verification is needed, your cost may increase. 
• New endorsements: Additional coverage, such as water backup or replacement cost upgrades, increases the premium. 

Even small adjustments can impact your escrow account and mortgage payment. 

How homeowners insurance premium increases affect your mortgage payment 

Because your homeowners insurance is paid through your mortgage escrow account, premium increases directly affect your total monthly mortgage payment. 

Here’s how it typically works: 

1. Your insurer sends Desert Financial the updated premium.
2. Desert Financial updates your escrow projections.
3. At your next escrow analysis, your monthly escrow portion changes. 
4. If the increase caused your escrow to fall short, you may also see a shortage.

Even if your loan balance and interest rate remain the same, a higher insurance premium can cause your total mortgage payment to increase. 

Common scenarios that lead to escrow shortages 

Insurance premium increases are one of the most common reasons members experience escrow shortages. 

This can happen when: 

• The premium increased after your escrow projection. If your rate changed during the year, the escrow amount collected may no longer be enough. 
• The insurance company updated your coverage without notice. Automatic adjustments sometimes occur at renewal. 
• You switched insurance companies. If your new premium is higher or your old policy refund was not deposited into escrow, a shortage may result. 
• The insurance company issued multiple small increases. Small changes can add up over the year. 

Desert Financial advances funds to pay insurance bills on time, but the difference must be settled at your annual analysis. 

How to confirm whether your insurance premium increased 

If your mortgage payment increased unexpectedly, it is a good idea to review your homeowners insurance renewal documents. Here is what to look for: 

• Your new annual premium amount
• The previous year’s premium
• Changes to coverage, deductible, or endorsements
• Any notices about replacement cost adjustments
• Explanations for rate changes

If you do not see an obvious increase, your insurance provider can assist you in reviewing your renewal details. 

What you can do to help manage rising insurance costs 

While some increases are unavoidable, there are steps you can take to reduce or manage your homeowners insurance premium. 

Review your coverage with your insurance agent. Ask whether your policy includes optional coverage you may no longer need. 

Increase your deductible. A higher deductible can result in a lower premium, but make sure it fits your financial situation. 

Ask about discounts. Many insurers offer discounts for: 

• Alarm systems
• Smart home devices
• Impact-resistant roofing
• Gated community locations
• Bundling home and auto insurance

Shop around for better rates. Comparing quotes may help you find more competitive pricing, but be sure the lender receives your new declarations page. 

Notify Desert Financial when switching insurance. Providing updated policy information ensures your escrow account reflects correct costs. 

Deposit any insurance refunds into your escrow account. This helps maintain the correct balance and avoid shortages. 

These steps can help you control your premium or at least reduce the impact on your escrow account. 

When to contact Desert Financial 

We’re always here to support you with clear answers and member-first service. Contact Mortgage Servicing at (602) 433-7097 or firstmortgageservicing@desertfinancial.com if: 

• Your mortgage payment increased and you’re not sure why. 
• You believe your insurance premium was recorded incorrectly.
• You recently switched insurance companies.
• You need help understanding your escrow analysis.
• You want to know how an insurance increase affects your escrow account.