Why are my insurance rates going up?
From the gas pump to the grocery store, it’s no secret that prices of nearly everything are going up. As you probably already know, home prices and the costs of new cars have experienced a similar trend. The current housing market is crazy and people are buying cars that haven’t even been built yet. It’s a difficult time for many people, which makes the timing of this newsletter more important. Insurance rates are increasing to counteract rising home and car prices.
We talked about the causes of home insurance rates going up in a previous newsletter, but let’s revisit the main factors.
The biggest cause of rising home rates is the rise in material costs. Home insurance policies are usually rated based on the replacement cost of your home, which is a calculated dollar amount for what your home would cost to rebuild, as is, with all new materials. Seeing as material costs are going up, replacement costs are going up as well. And as you probably can guess – the higher amount the home is insured for, the more it will cost to insure.
Also factored into a replacement cost estimate is the cost of labor. With labor costs rising, this also contributes to higher home insurance.
A typical home insurance policy will include an inflation guard. An inflation guard increases the home coverage amount by a small percentage each year to keep up with inflation. Considering the inflation we are facing right now, most insurance companies are increasing this percentage and plan to keep the increased percentage moving forward.
Keep in mind your insurance company and agent are making sure that your home is insured properly and is fully covered in the event of a loss. These adjustments are necessary because the last thing anyone wants is to run out of coverage due to underinsuring your home.
Auto insurance increases are starting to occur to keep up with rising car prices/values and rising repair costs. Claims costs are going up for insurance companies as a result of these increases, so they are starting to raise insurance rates to counteract this.
Another smaller factor in rising auto insurance rates is the fact that people are starting to go back to the amount they were driving pre-pandemic. You may have seen either a rebate or your overall rate go down during the beginning of COVID since people were not driving as much. Now that people are going back to work and fewer and fewer employees are working from home, insurance rates are slowly rising due to the increase in driving.
Limiting the Increase
It is important to note that these insurance rate increases are going to be industry-wide. Whether your insurance company is raising their rates now, or they are waiting until next year, the increase is coming.
While on average, this year most insurance policies are going up, it is a time like this where having a trusted insurance agent is so valuable. They know when the right time is to shop your policies around to other companies. Moving your business now may only delay the increase in your rates. But only if you move to a company that has not taken an increase yet. Your agent put you with your insurance carrier because they are the best fit for your needs and budget. Trust that your agent is always keeping your best interests in mind. They’re working hard to keep your rates steady and you fully covered.