As individuals review their insurance policies for the year, the reality is that homeowners and auto insurance rates will continue to rise in 2024. There are many factors that have caused the increases we have seen over the past couple of years, and we expect this trend to continue in a market where inflation and rising replacement costs present challenges for both individuals and businesses.
In this article, we will provide insight into the reason behind the increased cost of homeowners and auto insurance rates, and share some key factors to consider about your coverage options moving forward.
Why is my Homeowners Insurance Rate Increasing?
1. Rising Replacement Costs
Since the start of the pandemic we have seen an increase in material costs, supply chain disruptions and a labor shortage in the construction industry.
Material increases
26% increase in building materials
16.3% increase in asphalt roofing materials
6.3% increase in lumber and wood products
Supply chain disruptions
88% of firms experiencing project delays
94% of fortune 100 companies report supply chain interruptions
2. Increased Weather-related Losses
The United States has experienced an uptick in extreme weather events and catastrophes in the last two years, which directly correlates to increasing premiums. These weather-related events have caused more widespread/high-cost claims at a time where we are already experiencing higher replacement costs for homes.
According to the National Centers for Environmental Information, the U.S. recorded 20 weather/climate disaster events in 2021 with losses exceeding $1 billion each. This is compared to an average of 7.7 annual events (from 2017 – 2021).
Has your coverage kept up with inflation?
Rising replacement costs mean that what used to be covered by your policy may no longer be sufficient. Example: John’s policy has $500,000 in coverage to rebuild his home. However, John may now need $600,000 in coverage with the jump in materials and labor costs.
Why is my Auto Insurance Rate Increasing?
1. Increased cost of vehicles/vehicle repairs
Since the pandemic, the cost of both new and used vehicles has increased. We have seen a shortage of new cars available due to supply chain issues which has driven up the cost and demand of used cars. Additionally, the technology used in new vehicles is becoming increasingly more expensive to repair. What was once considered a basic fender-bender now may require not only damage to repair the bumper but may also require repairs to technology such as backup cameras.
Auto inflation factors include:
12% increase in new car prices due to limited inventory
40% increase in used car prices
15% increase in repair costs
8.2% increase in hourly labor
2. Increased number of accidents
In 2021, the U.S. saw the highest level of fatalities on the road in nearly 16 years. Cost for health care has also increased, so when someone is injured in a car accident the resulting medical costs are higher. More accidents, combined with the rising cost to repair vehicles and the rising bodily injury costs directly correlate to the increase in insurance premiums.
Maintain a Full-Coverage Auto Insurance Policy
While it may seem enticing to decrease the limits on your auto insurance policy, we still recommend maintaining levels of coverage beyond the state defined minimums. These minimums offer very little financial protection in the event of an accident and can have a long-term impact on your bottom-line.
How to Combat Rising Costs and Inflation
At Walsh Duffield, we are an independent insurance agent – which means we work with multiple carriers and can help shop your insurance for you with the companies that we consider the best in the business. We have the best interest of our customers in mind and want to help you protect your most important assets with the right level of coverage.
We encourage you to review your existing homeowners and auto insurance policies with your agent and consider the following tips to combat rising costs and inflation:
- Understand your coverage
Have your agent explain your coverage to share potential gaps in your coverage based on the current market. Make sure you’re not underinsured by factoring in any home renovations you may have completed. Evaluate the need for an umbrella policy that can help cover the gaps in a home or auto policy. Look for opportunities to cancel or reduce any coverage you may no longer need. - Take preventative measures to protect against losses
Some insurance carriers offer discounts for things such as for smoke detectors, fire alarms, water sensors, interior sprinkler systems and smart home protection devices. Completion of a safe driving class can also lead to a discount on auto insurance with most carriers. - Consider higher deductibles
If you have enough money in the bank to cover a higher deductible in the instance of a loss (for example $1,000 on auto, $2,500 on home) this is becoming a more common way to reduce insurance premiums. - Explore Policy Discounts
There can be advantages to bundling your home, auto and other coverage with the same carrier for better pricing. Maintain a good driving record, credit score and payment history for optimal pricing. Some carriers offer a discount for paying the annual premium instead of monthly installments.
Contact the team at Walsh Duffield today to review your personal insurance policies.
Sources: The Hanover Insurance Group, NAHB, AGC, Accenture, U.S. Beaurau of Labor Statistics, AutoRetailNews, CCC Intelligent Solutions, CNBC, Travelers, The Wall Street Journal – “Auto Insurers Rising Rates Are No Accident”,