subject: Why insurance rates continue to rise [print this page]
Clients often wonder why their car and home insurance premiums are increasing without any claims being filed. The post-pandemic inflation is a contributing factor to this issue, but there are other significant reasons at play. As an insurance agent, part of my role is to clarify to customers why their premiums may be going up and suggest ways to reduce them. Here is the explanation:
Economic factors impact home and auto insurance costs:
1. Goods inflation: The prices of various goods rose in 2021 and even more in 2022. This includes food, gasoline, and other everyday items, leading to increased repair costs for homes and cars. 2. Labor inflation: The cost of labor has gone up, affecting the labor portion of many goods and services, such as repairs for damaged homes and cars.
Technological advancements in cars also influence car insurance rates:
1. Advanced technology: Modern vehicles contain thousands of semiconductors crucial for electronics like infotainment systems. They also have sensors and cameras for collision warnings, making repairs for damaged electronics costly.
2. More electric vehicles: Electric cars have even more electronics than gas-powered ones, resulting in 20-30% higher repair costs for damaged electric vehicles.
3. Raw materials: The prices of materials like semiconductors, sensors, and cameras have risen due to higher costs for raw materials like copper and silicone.
Environmental factors affect home insurance premiums significantly:
1. Extreme weather: The frequency of natural disasters, including severe storms, cyclones, floods, and winter storms, has increased, leading to more homeowners insurance claims.
2. Construction costs: Sourcing materials like lumber, oil, and steel has become more expensive, impacting building supplies' costs. Insurance companies must adjust for these expenses, resulting in premium hikes for consumers.
Even with a clean claims record, individuals are likely to face increased premiums. While price increases can be challenging, they are necessary to ensure that insurance companies can meet claim payouts amidst rising natural disasters and inflation. To save on insurance costs, consider:
- Finding discounts like good student credit or defensive driving class completion - Bundling policies with one carrier
- Increasing deductibles and self-insuring less expensive items or risks
- Shopping around for the best value and coverage across multiple insurance providers Underinsurance is a significant risk today, particularly with the inflated costs of replacing cars and homes.
It's crucial to have sufficient coverage to avoid financial strain in case of accidents or disasters. If you reside in Colorado and have not reviewed your home insurance coverage recently, contacting my team for an updated replacement cost estimate is recommended to ensure adequate coverage. For those outside Colorado, locating a Comparion insurance agent nearby or understanding the benefits of an independent insurance agent can help you navigate your insurance needs effectively.
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