Any time you turn on the television or glance at the newspaper, you are likely to see headlines about increasing prices. You’ll probably notice that it costs more to fill up at the gas station, it costs more at the grocery store, and it costs more for auto and homeowners insurance. This can be frustrating, especially around the holidays when we are generally spending more, and those few extra dollars that go to buying eggs and gas can really add up. First, let’s look at why auto and home insurance prices are rising, and then we can go into how to mitigate those increases.
Insurance rates for home insurance and auto insurance are on the rise this year. While the two may not seem related, the causes behind the increases actually are very similar.
Factors driving the rise in auto insurance rates
- Weather – there were 20 separate weather-related incidents in 2021, each single event caused over $1 billion in damage. This means that auto insurers are having to raise rates to cover over $20 billion in loss events.
- New cars – the cost of new vehicles is up almost 10% in the last year. This is partly due to supply chain issues – there is a shortage of microchips, which are a key part of the operating system in most vehicles these days. With less microchips, there are less new cars available.
- Used cars – because new cars are in short supply, the cost of a used car has sky-rocketed 26%, according to the U.S. Bureau of Labor Statistics.
- Fatal accidents – there has also been a significant rise in the number of severe or fatal accidents. According to the USDOT, in the first 6 months of 2021, more than 20,000 people died in car-related incidents. That is 18.4% higher than the previous year, and it is the highest number of fatalities since 2006.
- Claims – the average cost of an auto claim has risen 20%, and costs for parts to repair vehicles have gone up 6%.
Factors driving the rise in home insurance rates
- Weather – 18 reported weather disasters, with over $1 billion in losses during each of these events. Weather events have the potential to increase home insurance rates.
- New homes – the cost of materials for a new home have gone up 18.6%; lumber and wood have risen by 6.2% and asphalt roofing materials are up 16.3%
- Lack of labor – currently there are about 358,000 job openings in the construction sector, which means there are fewer people to do the work, so timelines are longer and costs are higher.
Now that we know a little bit of why insurance rates are on the rise for home and auto, what are some things that you can do? Getting in touch with your Walls Insurance agent will help you to better understand how these changes can impact you personally. They are here to advocate for you and to act as an advisor. Your agent will be knowledgeable about your personal needs as well as the options available through your particular insurance company. Because they know the company, the agent will be able to cut through the insurance jargon and find the best fit for the individual. Here are a few options you might discuss:
- Coverage Review – this will take a closer look at your existing coverage and see if there is anything that you are currently covered for but don’t really need, or if you are missing something important. If you choose to scale down to a lesser coverage option, you could possibly supplement through specialty options that may cost less.
- Review Decreasing Deductibles and Loss Forgiveness – you may have these options within your current coverage, and your agent will just go over the benefits of these.
- Decreasing deductible (DD) means each year you get a certain amount applied to your deductible – Ex: you might get $100 of DD and your deductible might be $500, so really you only have to pay $400 before your insurance kicks in.
- Loss forgiveness (LF) means you can avoid a rate increase related to one loss over a set period of time.
- Bundling – you could discuss ways to combine your coverage into “bundles”. Many insurance companies will offer discounts if you choose to bundle, which just means you are purchasing more than one kind of insurance from the same company. While this may seem attractive, your insurance agent should be able to tell you if a bundle would be beneficial.
- High Deductible – another option you could discuss would be to consider a higher deductible plan, in order to get a lower premium. If you go with a high deductible plan, this means that you are opting to pay less on your monthly premium. If you do have to file a claim, you will have to pay more out of pocket to reach the deductible and the point where insurance starts to pay. This could be a good way to go in order to save money, because if you don’t have to make a claim, you will pay less. However, if you do have to make a claim, you could end up paying more. Talking to your agent about what would suit your lifestyle is the best way to make the choice.
Finding ways to save money as costs continue to rise is really important, but it can be hard to do, especially in areas where you are not an expert. Using an independent insurance agency like Walls Insurance is like hiring an expert to help you make the right choices. We have a team that has a combined 180 years of experience in the insurance world, and our company has worked with over 40 different insurance companies. Our knowledge and experience will allow us to give you the best advice and to work with you to save money while making sure you have good coverage for any curveball life might throw at you.
