Have you recently checked your mail and noticed that your home and auto insurance renewals went up? If so, you’re not alone! On average, home and auto insurance rates have jumped 23% across the United States in 2024. This rate surge has left policyholders confused and frustrated, seeking answers to why their insurance costs have gone up so much. Here are the biggest reasons your rates are going up and a few ways you may be able to lower your premiums:
Natural Disasters: One significant driver of increasing insurance rates is the growing frequency and severity of natural disasters. In the past couple of years, insurers have faced mounting payouts for damages caused by hurricanes, wildfires, floods, and other catastrophic events. For every dollar in home and auto premiums collected last year, insurance companies paid out an average of $1.10 in claims – most of which was paid out in weather related events.
Inflation: The recent jump in inflation has played a pivotal role in shaping insurance premiums. Inflationary pressure drives up the costs of materials, labor, and medical services, amplifying insurers’ claim expenses. In 2023, U.S. insurance companies hit a 10-year loss high, paying out over $65 billion in claims. This sudden increase in loss ratios has hit many insurance carriers hard, and some carriers that have historically tried to keep their rates stable have been forced to make big rate adjustments.
Lawsuits – AKA Social Inflation: Another factor driving insurance rate hikes is the evolving legal landscape surrounding liability and litigation. In the insurance field, we refer this grow trend of plaintiffs seeking large monetary relief for their injuries as social inflation. If you think about it, you can’t drive down any major highway without seeing a billboard that says something to the effect of, “Injured in an accident? Call now!”. Many perceive these lawsuits against insurance companies as a David versus Goliath scenario, and don’t mind seeing companies pay out substantial settlements. However, it’s crucial to recognize that when insurance companies have to pay out large sums of money in defense and settlement costs, it impacts everyone’s insurance premiums.
You may be thinking, that’s all well and good, but I haven’t filed any claims or been involved in any lawsuits. So, why are my rates going up? First, let me assure you, insurance companies are surcharging the policyholders that are filing claims, and if you haven’t had any claims, you should be getting a claims free discount! In order to understand why overall rates increase, it is important to understand that insurance operates on the principle of risk pooling, where premiums from many policyholders are pooled together to cover the losses of the few who experience them. This may seem unfair, but this system spreads the financial risk across a larger group and actually makes it more affordable for all policyholders.
Now to the big question. How can you save money on your home insurance? Here are a few ways I would recommend lowering your home insurance:
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Shop Around: First, start by shopping around and comparing quotes from multiple insurance companies to find the best rates and coverages.
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Bundle: Consider bundling your home and auto insurance policies with one company to receive a multi-policy discount on both policies!
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Look for Discounts: Ask your agent if there are any discounts available on your home and auto that you may not be receiving, such as a defensive driving credit or paperless options. Also, make your agent aware of any alarm systems installed in your home and/or any completed updates, such as a new roof.
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Increase Deductibles: Raise your deductibles to lower your premium, but ensure it’s an amount you can afford in the event of a claim.
Recent trends in the insurance industry have impacted rates in a major way, and in turn, left policyholders frustrated as their rates continue to increase year after year! As a general recommendation, you should review your home and auto insurance at least every 3 years to ensure you are still getting the best rate and that your coverages are up to date. If you have any questions about your home or auto insurance, don’t be afraid to reach out!