Rising insurance rates can be perplexing. “Why?” is one of the most commonly asked questions of insurance agents. The short answer is because of fluctuation. Fluctuations of home and auto rates are due to a number of factors. A better understanding of these factors will help you be prepared for rising insurance rates in the future and aid you in lowering them.
What’s causing rates to fluctuate?
According to Hanover Insurance, several factors cause fluctuations in insurance rates. For auto insurance, these include increased repair costs from new technology, greater numbers of cars on the road and accidents caused by distracted driving. For example, more cars on the road means more fatalities. And close to 500,000 Americans use cellphones while driving, which has greatly increased accidents caused by distracted driving.
For home insurance, causes include larger homes, storms creating more damage than usual and increased costs for materials and labor to repair homes. The average size of a home has increased by nearly 30 percent in the last 25 years, according to Hanover Insurance. Also, the average homeowners claim is now greater than $11,000. Also, a little-known fact: many home insurers increase rates for new home buyers based on the previous owners’ claim history. Learn more about these and additional potential factors.
What to do about it
What can you do to reduce your insurance rates? Here are several ways to save money when the rates do go up. Consulting your private insurance agent is a good place to start when dealing with any insurance issue and rate increases are no different. Your agent can review your policies and find ways to reduce your premium.
Next, you can review your coverage and deductibles. Depending on your age and circumstances, you may require less or more coverage as life goes on. Make sure to periodically evaluate how much coverage you actually need. Take a look at your deductibles. Increasing auto and home deductibles can reduce your monthly premium.
Look for discounts, avoid switching insurers too often
Another thing to keep in mind to combat insurance rate increases is discounts. If you have a child who excels in school, “good student” auto rate discounts can reward drivers for those good grades. Auto insurance discounts are often available if your student is away at college and not driving the family vehicles for much of the year. There are plenty other discounts as well, such as the low-mileage discount if you do not drive too often. As your life circumstances change, always ask your agent if you qualify for any new rate discounts.
Avoiding risks can also stop your rates from increasing. What this means is that certain home purchases, such as trampolines or diving board pool attachments, can increase your home insurance rates or even make you ineligible for insurance with some carriers.
Finally, loyalty and safety are key. Insurance companies reward client loyalty and safe driving with additional coverage options such as second chances for accidents and deductible dividends. Switching insurance carriers frequently can offer small immediate savings, but is not a wise move long term, as it will cost you valuable loyalty credits that you could be accumulating. For extra ways to save money on insurance, check out these tips.
When home and auto insurance rates increase, now you have a better idea why and how to save money once they do. Keep in mind the factors discussed here and remember to follow these tips and you will hopefully be paying less soon.
by Jack Mainellis