Insurance premiums are increasing for almost everyone, almost everywhere. What the heck is going on?
Many homeowners in states like Florida, California, and Texas are seeing huge increases because these states often experience high-risk natural disasters. Hurricanes in Florida, wildfires in California, storms in Texas and tornadoes throughout the Midwest can lead to expensive property damage claims. It’s risky for insurance companies to insure homes and commercial properties in these areas. When claims of this kind occur, they are big, complicated, and ultimately contribute to insurance companies raising premiums. It’s not just those personally impacted by the event, that see increases, it affects everyone insured by that company.
Just like anything else, insurance is subject to inflation. The parts, materials, and equipment an insurance company needs to repair/replace damaged property have become harder and taken longer than usual to get. They used to be able to predict those costs ahead of time and build them into their rates. Because the distribution of the goods and materials isn’t as reliable as it used to be, it’s become very hard for them to forecast their material costs and build them into an appropriate rate. This scenario exposes them to unknown potential costs and expenses, so they raise their rates aggressively and/or stop doing business in areas all together. State Farm, Allstate, Farmers & Nationwide are just a few of the companies who have withdrawn from writing new businesses in some states.
Additionally, technology seems to advance each year. Newer cars and homes often come with high-tech features that make our lives easier that we really appreciate. However, that technology is more expensive to repair/replace, and contributes to higher insurance costs. Just consider an automobile bumper!
Despite inflation and increasing costs, you can push back to lower premiums. Your first line of defense is always to increase your Deductibles. This is the amount of money you agree to pay out of your own pocket before your insurance company starts to pay. Higher deductibles can reduce your premium. But that means you’ll have to pay that out-of-pocket cost if you make a claim.
You can use technology to your favor, if you’re willing to use Telematics. A Telematics system allows insurance companies to track your driving habits and reward you for them. If you are a safe driver, a telematics system could help lower your car insurance premium.
They are not new, but it is surprising how many don’t take advantage of combining their policies with one company to get a multiple policy discount. Being a good student, maintaining a safe driving record, and protecting your credit are always helpful when it comes to getting your best rates.
Remember, insurance is there to protect you and your stuff. While it’s important to try and save money, it’s more important to make sure you have the coverage you need. Failing to carry sufficient coverage can cost you more in the long run when it comes time to repair/replace or even sell your property. It’s always a good idea to talk to an insurance professional if you have questions or need help understanding all this. Keep learning and keep saving!