Understanding Rising Insurance Rates: Why They Increase and How to Mitigate Costs
By Jeffrey Meenes, CFP® (Published Date December 19, 2024)
If you’ve noticed that your insurance rates are ever-increasing, you’re far from alone. The average cost of car insurance has jumped more than 20% in the last year.1 The average homeowner's insurance premium rose 7.6% in 2021 from 2020.2 The countrywide average auto insurance expenditure increased 1.4%.3
In this article, we look at why rates are increasing and what you can do to help mitigate these rising rates.
What Causes Insurance Rates To Rise?
Insurance rates are influenced by various factors, most of which are beyond your control. Here are just some of the reasons why your premiums might be going up:
- Inflation
- Rising costs of living
- Increased frequency and severity of natural disasters
- Supply chain disruptions
- Global unrest
- Increase in claims
- Medical advancements
Steps You Can Take To Combat Rising Insurance Rates?
While it may seem like rising insurance rates are out of your hands, there are things you can do to ensure that you're still getting a good value for your money.
Shop Around for Better Rates
One of the best ways to combat rising premiums is to shop around. Don’t assume that your current provider is offering the most competitive rates. Get quotes from multiple companies and compare coverage options. In some cases, you may find a better deal by switching insurers. You might consider using an agent to assist with this process.
Bundle Your Insurance Policies
Many insurance companies offer discounts when you bundle multiple policies, such as auto and home insurance, with the same provider. Bundling can save you significant premiums and make managing your policies easier.
Increase Your Deductible
If you can handle a higher out-of-pocket cost in the event of a claim, consider raising your deductible. This can lower your premium, as insurers often offer lower rates for customers willing to take on more risk.
Ask About Discounts
Many insurers offer discounts for various reasons, such as having a clean driving record, installing safety devices in your home, or being a long-term customer. It never hurts to ask your provider about any discounts you qualify for.
Review Your Coverage
Regularly review your insurance policies to ensure that you're not over-insured. For example, if you drive to the office less than you used to, you may no longer need as much coverage for the reduction in miles. Adjusting your coverage levels can reduce your premiums without sacrificing protection.
Paying for insurance is just one aspect of an individual's many financial considerations. While rising premiums may feel overwhelming and beyond your control, there are steps you can take to ensure you are getting the best policy and rate possible. Start by assessing your needs. It can also be beneficial to seek the assistance of a qualified professional, such as a Certified Financial Planner™.
This content is developed from sources believed to provide accurate information from Meenes Wealth Partners. It may not be used to avoid any federal tax penalties. Please consult legal or tax professionals for specific information regarding your situation. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.