Look, we get it! Nobody wants to see prices increasing – especially not insurance prices. The widespread trend, which extends far beyond the New River Valley and Salem, is that insurance prices are increasing. No, this isn’t a Blacksburg or Dublin issue, this is an everywhere issue.
You may be curious about why insurance prices are increasing and if there is anything you can do to combat this trend. The good news is our team of experts has insight into the increasing prices and can also give you guidance on how to navigate these increases in a best-case-scenario manner.
Let’s Review the Basics of Insurance
It can be helpful to understand the core concept behind insurance. At the most basic level, insurance is spreading the risk from one person to many people. You are paying a premium and distributing your individual risk collectively over other people. As the cost of those risks and claims increase for the insurance companies, so do the costs that are passed on to its customers.
Now, consider the role of inflation within the insurance ecosystem. As inflation increases the cost of cars, car parts and labor, it means that fixing a car is going to be more expensive. Therefore, settling those claims will cost more for insurance carriers. For example, our per claim costs for auto claims last year increased by 44%!
Similarly, if a home experiences major damages, it costs more to make necessary repairs because of the impact of inflation on labor, lumber and other repair materials.
In both scenarios, home and auto, the costs to satisfy a claim have increased. The insurance carriers have therefore had to increase their premiums so that they can continue operating as they pay out claims.
Do Natural Disasters Impact Insurance Costs?
There is often discussion about the role of natural disasters on the impact of insurance prices. It is true that the frequency and severity of storms have a bearing on prices. As they cause significant damage there needs to be a way for insurance carriers to offset these expenses.
Think about even recent major natural disasters in the United States – from major fires in California to flooding in North Carolina – carriers have to absorb those costs and it does get spread across policy holders. Remember, the basics of insurance is spreading the risk that one person has across a group of many.
How can I minimize increases?
- Consider Bundling: There is a reason they say that bundling is better. You can explore having your home and auto policies with the same carrier because there are often incentives to do exactly that. Additionally, using the same carrier ensures you have more clarity on how to file claims and get support, which offers a streamlined approach.
- Explore Other Carriers: We always want our clients to feel comfortable reaching out, asking questions, and letting us know their perspective on insurance prices. Sometimes we simply need to put our heads together, explore your coverage goals, and then together we can see if another carrier may be better. Give us a call or send us a text message if you want to get this started, 540-401-6015.
- Change Your Deductible: This is one of the simplest ways to reduce your premium. You can adjust your deductible to absorb a little more risk on your end while at the same time reducing your insurance premium.
- Protect Your Credit Score: Your credit score has a huge bearing on pricing. Protect your credit score as much as possible! Not only does it give you better rates for borrowing money but it gives you better insurance premiums for auto and home. Good credit typically equates to a lower premium. This is because your credit is a key component of your Insurance Score, which also includes your previous insurance claims. Keeping a good credit score and minimizing insurance claims will therefore result in a better insurance score, which thereby lowers your insurance prices. If you are curious about figuring out your insurance score you can go through Lexis Nexis to figure out what it is.
These are some of the tips we have for how you can navigate widespread insurance price increases. Perhaps our biggest tip of all is to work with an insurance company that wants to know you and will talk all of this through with you (hint: that’s us!). Sure, articles explaining the ins and outs of insurance are great but there’s nothing like discussing your unique circumstances and needs with someone who has a genuine interest in helping you. Even though insurance prices are rising, it is something that we can navigate – together.