Insurance premiums for home and auto are skyrocketing across the nation. Additionally, in certain areas many companies are pulling out altogether, making a less competitive marketplace which drives even higher premiums.
Consumers, already staggering from high inflation, are left feeling frustrated and c0nfused. It w0uld seem that insurance companies are taking advantage in a struggling economy and that they are “just out to get rich off of people”. In reality, the situation is much more complex than people imagine.
Bottom line is that insurance companies need to make money like everyone else. Furthermore, rates are based on many factors. A recent article put out by Fox business discusses some of the issues involved. More important than understanding every single facet of why rates are jumping, is understanding what you should do about it.
The temptation is to automatically lower coverage to keep your rates the same. As a blanket measure to save money, this is a terrible idea and can cost the policy owner much more, should a claim occur. A much more intelligent solution is to evaluate level of risk one is willing to accept, and what protections are most important. Then, if premium is still an issue, start by raising your deductibles, look for common discounts, and as a last resort, lower limits.
Before making any changes to your policies, it is important to evaluate how much you can and are willing to put toward repairs/replacement of the insured item if a w0rst case scenario unfolds. Equally important is evaluating what you can do without. For example, say you have bad hail damage to your car. You may be able to live with that or you may not. However, the same hail damage to your roof can pose a much more urgent problem. When you evaluate what you want covered and how, you need to examine all the factors. A good agent will help you through this process.
After assessing the situation, a good rule of thumb is to start reducing premium by raising your deductibles. Keep in mind that whatever your deductible amount is, you should have access to in liquid assets. As you are seeking to save money keep in mind that many companies offer bundle discounts. Take full advantage of these as they can save you up to 15-20%.
If it is absolutely necessary to lower coverage start by eliminating some of the policy endorsements, like blanket increases in personal property coverages. Keep in mind that whatever insurance doesn’t cover will ultimately be your cost if/when something happens. As a last resort, you can reduce coverage, BUT be very cautious about doing so.
You can also look at other carriers. The risk with this is that not all carriers/agents are created equal. A habit of price shopping can leave you with a very poor customer service experience when you need the support most. It is worth extra money to work with good people.
In summary, the philosophy of insurance is that you pay someone else to help cover your back when disaster strikes, this is the principal of risk transfer. So, whenever you make changes, you are either increasing or decreasing your risk. As important as saving money on a monthly bill is, be wary of potential costs down the road that are much higher than your current premium.