“Why does my neighbor pay less for homeowners insurance than I do?”
It’s one of the most common questions we hear and the truth is, homeowners insurance isn’t one-size-fits-all. From roof age to labor costs and even neighborhood factors, there’s a lot that goes into determining your rate (and your claim payout).
1. Labor Costs and Coverage Gaps Most People Miss
Many homeowners assume their insurance covers full replacement costs for damage but they often underestimate labor. Roofers, electricians, and contractors’ costs have surged across Colorado in recent years, and those rates directly affect your claims. If your coverage hasn’t been reviewed recently, you could be underinsured without realizing it.
According to KUNC1, Construction material costs in Colorado rose 20-40% since 2020, and overall project costs increased 15-25%, due to tariffs and labor shortages, meaning that what covered a full roof replacement a few years ago may no longer be enough today.
2. Why Your Neighbor Might Have a Different Rate
Even if your home looks identical to your neighbor’s, your premiums may differ. Insurers factor in:
- Roof age and material (newer roofs are cheaper to insure)
- Number of residents (more people = more liability exposure)
- Your individual claims history (frequent claims can raise rates)
- Credit-based insurance score (in many states, credit impacts premiums)
- Neighborhood claims history (if nearby homes have filed multiple claims, it can raise rates)
We discussed this more in 7 Ways Colorado Homeowners Can Save on Their Insurance Premiums where small updates like replacing your roof or improving fire resistance can make a noticeable difference.
3. Understanding Roof Coverage: Replacement Cost vs. Actual Cash Value
Here’s one of the biggest points of confusion:
- Replacement Cost (RCV) policies pay to rebuild your roof with new materials.
- Actual Cash Value (ACV) deducts for depreciation, meaning you get the used value of your roof.
So if your roof is 10 years old and hail hits, you might receive only a fraction of the repair cost under ACV. We touched on this in Why Notifying Your Insurance Company About Your New Roof Matters updating your insurer after a roof replacement could earn discounts and ensure proper valuation.
4. Escrow and Payment Confusion
For most homeowners, insurance is paid through escrow – bundled with your mortgage and property taxes. That means premium changes might appear in your monthly mortgage, even if your policy technically renewed. This often surprises new buyers, which is why we created Managing Escrow: Tips for Homeowners and Homebuyers to help you track how insurance fits into your total payment.
5. Depreciation and Claim Payouts
Your home’s materials, from siding to flooring lose value over time. That depreciation can impact how much you receive after a claim. A roof installed in 2010, for instance, might be valued at only 40–50% of its replacement cost today under an ACV policy. Depreciation is one of the top reasons claim payouts differ from homeowner expectations, especially on older properties.
6. Yearly Renewals and Life Changes
Your home evolves and your policy should too. Each year, Mitchell Insurance proactively reviews client coverage to catch outdated limits, missed discounts, or major changes such as:
- New renovations or additions
- A new baby or family member moving in
- Updated safety systems or roof replacements
As discussed in How Renovations Affect Home Insurance Premiums, even small upgrades can change your protection needs.
FAQs
Q: Why does my rate increase even if I haven’t filed a claim?
A: Regional factors like construction costs, storm frequency, and neighborhood claims history can all affect rates — even if your home itself hasn’t changed.
Q: Is depreciation always deducted from my payout?
A: Only if your policy pays Actual Cash Value (ACV). Replacement Cost (RCV) policies reimburse full rebuild costs, minus your deductible.
Q: How often should I review my coverage?
A: Annually. It’s especially important after major life or home changes — new roof, remodel, or family addition.
Q: Why is my insurance paid with my mortgage?
A: If your lender escrows property taxes and insurance, payments are bundled into your mortgage to ensure they’re paid on time.
Homeowners coverage doesn’t have to be confusing — it just needs to be customized. Whether you’re a first-time buyer or a longtime Colorado homeowner, our team is here to help you understand your options, compare coverage types, and ensure your policy truly fits your home and your life.
Contact Mitchell Insurance Group to schedule your next coverage review.
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