Home & Auto Insurance Inflation: What You Need to Know

If it seems like every time you turn around prices go up, you’re right. Worldwide inflation, due in large part to pent-up demand being unleashed as things returned to something that looked like normal after the pandemic, is to blame. Prices have increased across every industry – whether you are at the grocery store, buying a new car, starting a home improvement project, or shopping for home & auto insurance.

Like the price of gas, insurance prices move with inflation and it can be difficult to understand all the factors that make up an insurance rate. When developing the rate insurance companies look at the trends in the marketplace such as the cost to repair or replace a car, the cost of labor and materials to build or repair a home, and many other factors.

Here, we’d like to show you why the cost of home insurance and auto insurance are increasing, and what you can do about it.

Why is the cost of home insurance increasing?

There are two main factors behind the rising cost of homeowners insurance.

1. Materials Shortage

Prices for lumber, shingles, nails, and all the other materials used to build or repair a house have spiked over the last year due to decreased availability, supply chain bottlenecks, and skyrocketing shipping costs.  The shortages cause delays in home building and home repair, which increases the cost of a new home or repair job.

 

2. Labor Costs and Shortage of Skilled Trades Workers

Prices for lumber, shingles, nails, and all the other materials used to build or repair a house have spiked over the last year due to decreased availability, supply chain bottlenecks, and skyrocketing shipping costs.  The shortages cause delays in home building and home repair, which increases the cost of a new home or repair job.

Keep reading for tips on how to save on your homeowners insurance.

 

Why is the cost of auto insurance increasing?

There are two main factors behind the rising cost of homeowners insurance.

1. The Chip Shortage

A car today can have up to 150 tiny chip processors controlling everything from the engine to the dashboard electronics.  During 2020 in the height of Covid-19, the demand for new cars drastically decreased and car manufacturers scaled back production plans and reduced their orders of microchips. When Covid restrictions lifted, car manufacturers could not keep up with the sudden increase in demand.  The global shipping shortage also played a major role because chip factories were unable to ship microchips to production factories, therefore increasing the length of time it takes to produce a car.

 

2. The Cost of Auto Repairs and Labor Have Increased

Just as car companies cut the need for production on chips, they did the same for all the other parts needed to build or repair a car.  Due to the increased cost of new vehicles, more people are attempting to keep their older cars running longer, which increased the demand in the secondary market for parts.  When you pair this up with the ongoing supply chain issues and the increased cost of labor, the cost to repair a vehicle has drastically increased.

 

What are some of the ways to save on home and auto insurance?

The first step to combating an insurance rate increase is scheduling an appointment with one of the insurance advisors in our office. We have found it is best to understand one’s current situation, discuss the current coverage, and then determine the most effective ways to save without compromising vital coverage.

But in general, here are some ways to save on your insurance premiums:

Home

  • Increase Your Deductible
    • Insurance carriers will provide lower rates for clients who choose to take on a higher deductible. They do this because they know for smaller claims insureds are more likely to pay out of pocket rather than submit a bunch of small claims.
  • Home Improvements
    • It is important to let your agent know if you have made any significant home improvements to your house because carriers do provide discounts for updated roofs, plumbing, HVAC, and electrical systems.
  • Burglar Alarms/Water Detection Systems
    • If you did not have an alarm system or water detection system in your house when you originally put your policy in place you most likely are not receiving a discount for having them. Contact your agent to let them know you installed a monitored burglar/fire alarm, water detection alarms, or any other home safeguard that protects your home.

Auto

  • Mobile and Plug-in Telematics Discounts
    • Most insurance companies now have a mobile app or plug in device available for a discount. The discount usually is significant at 5-10% upfront and then insureds have the opportunity to earn additional savings for good driving.  Most decent drivers score well and earn additional savings at their next renewal.
  • Increase Your Deductibles or Remove Comprehensive/Collision on Older Vehicles
    • Just as we mentioned above on home policies, increasing your deductible will lower your auto insurance rate. When you as the insured take on a higher deductible the insurance company will provide a lower rate because you are taking on more responsibility when it comes time to repair your vehicle.  You also may want to consider removing the comprehensive and collision coverage on older vehicles when you are comfortable if they are not replaced at the time of a claim.
  • Pay the Premium in Full
    • Not all but most insurance companies are now providing a discount when you pay in full for the 6 month or yearly premium. If you are comfortable with paying the lump sum up front vs monthly then this is a great option for you.

THE BIGGEST WAY TO SAVE: BUNDLING ALL YOUR POLICIES WITH ONE CARRIER

You hear it on almost all the insurance commercials on TV, but bundling your home and auto with the same carrier is the biggest way to save on your insurance premiums.  The discount is typically between 10-20% a year for bundling.

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