Insurance for your most valuable things has become increasingly pricey. While general inflation has decreased, insurance expenses are becoming a larger portion of many households’ budgets.
Insurify, a virtual insurance company, reports that the average yearly rate for homeowners insurance climbed by about 20% between 2021 and 2023, with an additional 6% increase expected in 2024.This would increase the average policy cost to $2,522 by the end of the year.
Car insurance premiums have also skyrocketed.
The average cost of motor vehicle insurance increased by 16.5% from August 2023 to August 2024, according to the Bureau of Labor Statistics.According to Bankrate, the average cost of full coverage vehicle insurance in September was $2,348 per year.
According to Shannon Martin, a certified insurance agent and writer for Bankrate, several factors contribute to rising home insurance rates, including rising costs for homebuilding supplies and repairs, a major increase in claim litigation, and an increased frequency of weather-related catastrophes.
Extreme weather events, greater replacement and repair costs, and increased medical expenses following accidents have all contributed to higher auto insurance prices, according to experts.
Still, there are ways to reduce growing premiums. Here are five strategies to consider.
1. Shop around for a new insurer
Consider switching to a different insurance carrier. While most people continue with the same vehicle or home insurer year after year, experts recommend shopping around.
According to a new survey by Autoinsurance.com, 37% of drivers want to switch insurance providers due to increased insurance premiums, while 27% have already obtained quotes from new insurers.
Experts recommend shopping around for vehicle and home insurance once a year to ensure that your current rates are still reasonable. You should also compare rates if your circumstances change, as this may alter your rate.
“If you move, get married, or buy a new car, that’s also a good time to shop around,” says Maya Afilalo, an insurance analyst at Autoinsurance.com.
Despite the negative impact of catastrophic weather disasters on insurance, corporations are nevertheless adjusting in different ways.
“So a company you’re currently with may have a much higher rate than a company that’s already in the recovery stage,” said insurance agent Mike Barrett, owner of the Barrett Insurance Agency in St. Johnsbury, Vermont. “Shopping could really save you some money.”
Before renewing your policy, acquire quotations from several insurers to compare pricing. To acquire rates from multiple firms at once, go online or download insurance marketplace applications. Alternatively, you might speak with an independent insurance agent – this is normally free because they are paid a commission by the insurer for selling you insurance. Find an agent near you through the Independent Insurance Agents and Brokers of America.
Lower rates are not the only thing to consider. Check out AM Best and Demotech, which measure insurers’ financial stability and dependability.
“What you’re looking for is the carrier’s financial strength, which demonstrates their ability to pay future claims, as well as their history of paying claims in the past,” said insurance agent David Carothers, a principal with Florida Risk Partners in Valrico, Florida.
2. Increase your deductible
Your deductible is the amount you must pay before the insurance company covers your expenses. Raising your deductible can result in reduced auto and home insurance prices.
For auto insurance, “increasing your deductible from $500 to $1,000 can reduce optional collision and coverage premium costs by 15% to 20%,” said Loretta Worters, a vice president at the Insurance Information Institute.
Raising your deductible requires a sufficient emergency savings to meet the cost.
3. Adjust your coverage
If you’ve been with the same insurance provider for a while, you may have made changes to better protect your house from threats — such as a new roof, hurricane-impact windows, or a security system — since you took out the policy. Experts advise that updating your policy to reflect these changes could save you money.
Reducing coverage for specific goods, such as jewelry or artwork, may help lower your homeowners rate.
Dropping collision and/or comprehensive coverage on older cars might also save money. According to the Insurance Information Institute, if the value of your car is less than ten times the premium, you should consider canceling coverage. However, if you are in an accident or your car is damaged due to weather, theft, or any noncollision occurrence, you will have to pay for the damages out of your own pocket.
“You may be responsible for paying for damages to other property that are not covered by your insurance company. So, you know, there’s some risk and reward,” explained Rod Griffin, a senior director at Experian.
However, experts advise that having enough insurance and the correct type of coverage may save you money in the long term. Saving on rates may prove costly if you do not have the necessary insurance, such as flood insurance.
According to the Federal Emergency Management Agency, just one inch of water can cause around $25,000 in property damage. However, most homeowners insurance policies exclude coverage for flood damage, leading to a low demand for it. According to the University of Pennsylvania’s Wharton Risk Center, around 30% of U.S. properties in flood-prone areas carry flood insurance.
Even if you don’t live in a high-risk area, experts say you should consider flood insurance.
“Many individuals don’t buy it because their bank doesn’t compel them to, and then a hurricane strikes. According to a map, they are not in a flood zone, but there is a storm surge and numerous uncovered claims,” said Carothers of Florida Risk Partners.
4. Look for potential discounts
Bundling coverage is one of the most commonly advertised discounts. You’ve probably seen a lot of advertisements promoting getting house and auto insurance from the same company to save money, but experts warn this isn’t always the case. You may be able to find better rates by using multiple firms.
“It’s really good to investigate both angles — bundling, not bundling — and always talk to your agent before you make big changes to your home or expensive changes that you think are going to save you money,” Bankrate’s Martin said.
Homeowners may receive discounts for maintaining a claim-free record or adding safety features.
Car insurance savings include safe driver and good student discounts, as well as taking a defensive driving course. There are also savings for senior drivers and those who drive less than the average number of miles.
5. Keep up your credit score
Your credit history might affect auto and home insurance costs. According to experts, the higher your credit rating, the less you may pay for insurance in places where credit is used to rate insurance firms.
Poor credit can lead to considerable increases in insurance costs. According to a Bankrate survey, drivers with low credit spend $4,349 per year for full coverage insurance, while those with excellent credit pay only $2,033.