Inflation & Rising Insurance Rates

Inflation & and Insurance Rates

We’ve all heard about the newest anxiety-inducing hot topic causing prices to skyrocket in nearly every corner of the country: INFLATION. It feels like a curse word we dare not utter in public! Unfortunately, the insurance industry has not been spared from the effects of this indiscriminate scourge to our economy.

WHY does inflation cause rate increases?

Auto insurance rates are going up. But why?! The incredible demand for both new and used vehicles coupled with rising rates of inflation mean that repairing your vehicle costs exponentially more now than just last year. This means your insurance company will increase rates to offset the increased cost to repair or replace your vehicle.

Home insurance has also taken a similar hit. Because of supply chain shortages and increased building costs, insurance companies know that the replacement costs on homes have gone up so much, they are faced with few options other than to increase rates in response. The nationwide average cost to rebuild a home went up 17% from January 2020 to January 2021. Even though construction has started to slow down recently, building costs are still at an all-time high.

WHAT ELSE may be causing your rates to increase?

Recent Claims for your home or auto often lead to increased rates. Did you place a claim after storm damage? Did any of the spring snow melt or heavy rainfall result in water backup claims?

Moving Violations since your last renewal, were you given a ticket for speeding, texting while driving or even seatbelt violations? Rates will also increase if you were convicted of DUI or were involved in any accident or damage to property. Any claim that results in a citation from the police will remain on your record for a minimum of three years. Simply changing companies won’t avoid the increases.

Life Changes can also affect what you pay for auto insurance. Did you add your teenage child onto your auto policy? Has your employment status changed, resulting in longer commutes to and from work? Have you or a teen driver completed school? If you were benefitting from a Good Student discount, those will cease. And if you have become divorced or widowed and your partner’s credit score was better than yours, you’ll see increases on your next policy.

Buying a vehicle will result in rate increases because the value of a new car and many used cars will likely be more than the car you are replacing. Incredibly, the price of a new or used vehicle is a staggering 40% more now than in January 2021! As the value of your vehicle increases, so will your insurance rates.

Your zip code can even affect your rates. If you have recently moved, where you live can make a difference. The rates will be higher in metropolitan and rural areas and less in suburban areas. This is all due to higher rates of accidents in metro areas, the longer commutes to work in rural areas, among other factors. How far you live from the nearest fire station will affect your home insurance rates. Buying your dream house out in the countryside can increase rates because the response time to a fire emergency will be much longer than if you lived in town.

There are ways to combat these rate hikes with varying degree of effectiveness.

  • Find out if placing all your policies with one company offers you multi-policy discounts.
  • DRIVE MORE SAFELY! This isn’t always simply out of your control. But obeying all traffic laws, never texting while driving and wearing your seatbelt are all things you can control and make you a more insurable driver at lower rates.
  • If you completed certain updates to your house, you might be in line for a discount. A new roof? Paid off your home mortgage? Did you remove insured hazards like a pool, trampoline or wood stove?
  • If your deductible is really low, you could consider increasing it. This will result in a lower premium but also make any future claims more costly.
  • Is now the time for your adult child to go on their own policy? This is especially the case if they have driving offenses that have inflated your rates.
  • Complete your degree! Many insurance companies offer price breaks to drivers who have a college degree.
  • Take the bus, bike or walk to work. The less you drive, the more you can save. Some companies offer a discount if driving time decreases significantly. That, and your risk of being involved in a motor vehicle accident goes down also.
  • Find out if discounts are offered when enrolled in a monthly EFT or if you pay in full.

With all the rate increases, it is important to carefully read your renewal notice from your agent and have a conversation with them about what options you might have. Communicate all changes with your agent so they are able to manage your policies effectively. Contact your insurance agent at Reliable Agency before your next renewal and we can help you identify any options that might be available!

© Reliable Insurance Agency 2021

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