Inflation and other factors have hammered the insurance industry of late. That’s especially true for auto and homeowners insurance.
Unfortunately, that’s led to massive premium increases for us as customers when our policies renew.
One customer, feeling the squeeze on her wallet, recently asked on the Clark Howard Podcast whether it’s her independent agent’s fault. Or whether she’s doing anything wrong that’s causing her insurance companies to hit her with major price increases.
My Insurance Policies Are Getting Much More Expensive. Is It My Independent Agent’s Fault?
My auto and homeowners insurance policies are going up by double-digit percentages. Should I fire my independent agent?
That’s what a listener asked on the Aug. 1 podcast episode.
Asked Jenny in Ohio: “I recently received my [renewed] homeowners and car insurance policies and noticed both went up substantially. Home is up 17% and car is up 9.8% per year.
“We use an independent agent for coverage and that may be where I’m going wrong. We have been with them since 2021 and have never had a claim with them — and only minor claims with our previous company.
“Should I stop working with an independent agent or is this just all about inflation? My paycheck just can’t keep up with this increase plus all the others!”
An independent agent, or insurance broker, can be a shortcut when it comes to comparison shopping. He or she can help find you the best rates using their connections and knowledge of the marketplace.
However, the cost to insure homes and cars has gone up, up and up this year. Expect the increases to continue — and at some insurance companies more than others.
“This is gonna sound like I’m being flippant. [But] the increases that you’re facing at 17% and 10% are much lower than we’ve been hearing from other people,” Clark says.
“Ironically enough, I’ve been encouraging people to go to independent agents that can shop multiple companies. You’re actually in the right place.
“And the increases you’re seeing are not out of the ordinary of what’s going on in the marketplace.”
Addressing the Homeowners Insurance Price Increases
Home prices reached a high point early in 2022. Inflation was starting to rise. The velocity of money in the United States was quite fast. Interest rates, including for mortgages, were at a historic low.
COVID-19 caused supply chain issues with lumber and other housing supplies, not to mention disrupting construction schedules in some cases. As a result, new builds slowed down as demand was increasing.
The result: a housing market frenzy that often saw buyers needing to make all-cash offers above the listing price to have a chance to buy.
The real estate market has settled down in 2023 with mortgage rates at much higher points, the cost of building materials moderating and a giant wave of rental properties such as apartments getting built and taking the edge off of the home-buying demand.
Still, insurers are seeing the downstream impacts of that spike.
“Homeowners insurance has gone up because we’ve had an escalation in the value of homes,” Clark says. “They’re going to go sideways or level out for a number of years moving forward. Because home prices have outstripped people’s ability to afford them.
“So we’re not going to see these rapid increases in home values moving forward. But there’s some catchup going on in the homeowners insurance market.
“Plus we’ve had an increase in storms of various types. Floods. Hurricanes. Fires. All these things. So it’s a tough time to be in the insurance business.”
The Key To Combating Expensive Homeowners Insurance: Your Deductible
It’s important to revisit your homeowners insurance to make sure you’ve got enough coverage. Especially if your home has gone up in value.
You should also consider comparison shopping for the best homeowners insurance companies now that the stakes are high with so many insurers raising prices. Your independent agent should be able to help.
But the most important thing you can do to keep your homeowners insurance premiums at a decent price is to set a higher deductible.
“Something I’m encouraging all homeowners to do is raise your deductible,” Clark says. “Your risk profile to the insurer drops. Your premiums drop.
“Just make sure that the deductible rise you do does not exceed if you have a mortgage on your home what your mortgage lender permits. But raising that deductible should save you potentially 30% on your homeowners insurance policy.”
Addressing the Auto Insurance Price Increases
Your independent agent is not to blame for your auto insurance spiking by 10%, Clark says. In fact, you may be getting off easy.
“The auto insurers have been losing money like crazy because the cost of repairing vehicles has gone up if a car is totaled,” Clark says. “The cost that the vehicle represents, the current value in the used marketplace, is so much higher than it was.
“The auto insurers are really taking it on the chin. And so the increases happening have been so large. We’re hearing reports where people’s auto insurance is going up 40% at renewal.”
You can ask your independent agent to help you re-shop your auto insurance policy. Right now, some companies are having to raise rates at a much, much faster clip than others. So it’s important to keep re-checking your options.
Avoid the Temptation of Making Small Clams if at All Possible
A rock hits your windshield. A crack nearly spreads across the entire thing.
That’s OK, though. That’s what insurance is for. Right?
Wrong, Clark says. At least in the long run, making small claims will come back to bite you in terms of the cost of your premiums in the future.
Raising your deductibles lowers your premiums. But that’s not all it does.
“It takes away the temptation of any small claims,” Clark says.
“Never, never not ever make what is considered to be a nuisance claim on homeowners or auto insurance. The insurers – you could have a tiny claim or a giant claim. You’re treated the same as having made a claim. And that is a difficult mark you don’t want to have.”
Final Thoughts
It’s a painful time to offer homeowners and auto insurance right now. Many insurers are facing rising costs and are raising prices on customers.
That’s why it’s as important as ever to comparison shop your policies. An independent agent or insurance broker can be a great solution to get that done.
You should also consider raising your deductibles if you can. That can lower your premiums and take away the option for you to file small claims that will stick on your insurance file for years to come.
