Why Insurance is Getting Expensive and What You Can Do About It

Man and insurance adjuster reviewing interior of home.

If you've noticed your insurance premiums creeping higher and higher, you're not alone.

In recent years, the landscape of insurance costs, both for cars and homes, has undergone a dramatic transformation. Statistics show that car insurance rates have been steadily climbing, with a year-over-year increase of 22.2%. Home insurance rates, meanwhile, rose an average of 11% in the last year, but rose much higher in a few states – 63% in Louisiana, for example.

The burden of rising insurance premiums has become a growing concern for individuals and families alike. Let's delve into the reasons behind this insurance premium surge and explore strategies to navigate these challenging increases.

Why are car and home insurance rates going up?

You may be wondering: why did my car insurance and homeowners insurance rates go up? The fact is that costs are up for everything across the board, which makes repairing and replacing things more expensive. The more expensive it is to repair and replace cars and homes, the bigger the insurance payouts on claims, and the bigger the insurance payouts, the bigger the premiums to cover those payouts.

As a result, insurance companies have largely been losing money for the past two years, with industry spokespeople claiming that they've paid out $1.10 in claims for every $1 they've taken in. These rate increases are a way for those insurers to stop losing money and start earning a profit again.

So why are repairs and replacements so much more expensive? Let's start with automobiles.

Vehicles today are not only more expensive to buy than they used to be, but they also come with much more sophisticated technology, ranging from sensors to self-parking features. While these advancements give us safety and convenience, they also impact the cost of repairs significantly. A fender-bender is a much more costly fix when there are cameras and sensors to account for.

Repair costs for vehicles were already on the rise before the COVID-19 pandemic hit, but since 2022, these increases have surged 10% or more annually. The average repair estimate for a vehicle in 2023 was a staggering $4,721. As a result, car insurance premiums are skyrocketing to offset these expenses.

The same is true for homeowners' insurance. Climate change has unleashed a barrage of extreme weather events, causing widespread damage to homeowner’s properties. The cost of repairing or rebuilding homes in the aftermath of hurricanes, floods, and wildfires has surged, pushing insurance premiums to unprecedented heights.

In 2023 alone, Texas incurred a jaw-dropping $400 billion in disaster damages, while Florida wasn't far behind at $390 billion. All of that destruction causes higher demand for materials and labor, pushing up costs even more.

Construction costs in the United States saw an average increase of 4% in 2023. Those costs are set to increase by 3-6% in 2024, according to a report by Currie & Brown. When you combine this with a shortage of skilled labor, repairs and replacements of property become more expensive.

What can I do to lower my insurance premiums?

While rising insurance costs may seem daunting, there are steps you can take to mitigate its impact:

1. Bundle your policies when you can

Consider consolidating your home and auto insurance policies with a single provider. This can often lead to substantial savings on premiums.

2. Look for discounts

Many insurance companies offer discounts that can help lower your premiums. You can take advantage of common discounts by:

  • Signing up for your auto insurance’s safe driving app.
  • Installing safety features in your home, such as monitoring services for cameras, new smoke detectors and fire extinguishers, and sprinkler systems.
  • Paying your policy in full. If you can manage this financially, you may see a lower premium when you pay for 6 months or 12 months of coverage at a time, as opposed to month-to-month.
  • Working in a certain occupation. Teachers, firefighters, and retired or active military members might quality for a discount on their home insurance premium.
  • Having a claims-free history. If you haven't filed a home insurance claim in a set number of years – usually three to five – your provider may give you a break.

3. Increase your deductibles to lower your insurance premiums

Just be mindful of setting deductibles too high, as it could render your insurance coverage too costly when you need it most.

4. Review your coverage often

Regularly reassess your insurance coverage to ensure you're not paying for more than you need. Eliminate unnecessary coverage and adjust your policy to align with your current circumstances.

5. Improve your credit score

Did you know that your credit score can impact your insurance premiums? Work on boosting your credit score, as a higher score may lead to lower insurance rates. This will be a win for your overall financial health, though, regardless of the impact on your insurance rates.

6. Take preventative measures

Investing in regular home maintenance and safety measures can reduce the likelihood of you filing insurance claims. Take good care of your property and consider installing safety features such as security systems. For your car, make sure you get to the mechanic for your regular check-ups and fluid changes. These proactive measures can help lower your insurance premiums in the long run.

Read more about how to save on home insurance in our Ultimate Guide for saving on home insurance. We have an Ultimate Guide for saving on car insurance, too.

Plan for rising insurance costs

With car insurance and home insurance rates going up, and inflation playing a key role in everyone’s finances, it's key to adopt a holistic and strategic approach to financial management. Take a close look at your budget and identify areas where you can reduce spending.

If you're grappling with personal debt, consider seeking help from our financial counselors who can help you devise a plan to regain control of your finances. It may be helpful to focus on repaying debt with a debt management plan (DMP) in order to open up more room in your budget for rising costs. DMPs are a great way to consolidate debts into a single, affordable monthly payment with reduced interest rates that accelerate your repayment and save you money in the process.

Remember, while the road ahead may feel challenging, with careful planning and informed decision-making, you can chart a course towards a more secure financial future.

Tagged in Insurance, Advice for families

Jesse Campbell photo.

Jesse Campbell is the Content Manager at MMI, with over ten years of experience creating valuable educational materials that help families through everyday and extraordinary financial challenges.

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