The cost of insuring your most valuable assets has risen dramatically. While overall inflation has slowed, insurance costs are weighing more heavily on many households' budgets.
The average annual rate for homeowners insurance rose about 20% between 2021 and 2023 — and homeowners can expect another 6% increase in 2024, according to Insurify, a virtual insurance agent. This would bring the average cost of a policy to $2,522 by the end of the year.
Auto insurance premiums also rose.
The average cost of vehicle insurance jumped 16.5% from August 2023 to August 2024, according to the Bureau of Labor Statistics. Bankrate estimates that the average cost of full coverage auto insurance in September is $2,348 annually.
Shannon Martin, a licensed insurance agent and writer at Bankrate, said several factors are contributing to higher home insurance rates, including increased costs for home building and repair supplies, a spike in lawsuits over claims, and an increased frequency of weather-related events.
Experts say extreme weather events, higher replacement and repair costs, and increased medical expenses after accidents have increased car insurance rates.
However, there are still ways to mitigate high insurance premiums. Here are six strategies to consider:
1. Find a new insurance company
A view of burning cars and structures as wildfires continue at the South Fork Fire in Ruidoso, New Mexico, US, on June 20, 2024.
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Consider switching to another insurance company. While most people stick with their car or home insurance from year to year, it's wise to shop around, experts say.
About 37% of drivers say they will or have already received a quote from a new insurer in response to rising insurance rates, and 27% have or plan to switch insurers, according to a new study by Autoinsurance.com.
Experts say you can shop for car and home insurance once a year to make sure the rates you pay now are still competitive. You may also want to compare rates if you have a life change that might affect your rate.
“If you move, get married or buy a new car, this is also a good time to shop,” said Maya Avellalo, insurance analyst at Autoinsurance.com.
Although extreme weather events have negatively impacted many insurance companies, companies are at different stages in terms of how they are adapting.
“So the company you might be with now may have a much higher rate than a company that is already in the recovery phase,” said insurance agent Mike Barrett, who owns Barrett Insurance Agency in St. Johnsbury, Vermont. “Shopping can really save you some money.”
Compare costs by getting quotes from a few insurance companies before renewing your policy. You can go online or use apps for insurance marketplaces to get quotes from several companies at once. Or you may want to speak with an independent insurance agent – this is usually free, because they usually receive a commission from the insurance company for selling you a policy. You can find an agent in your area through America's independent insurance agents and brokers.
Lower premiums aren't the only factor to consider. Check out AM Best and Demotech, which rate the financial strength and reliability of insurance companies.
“What you're looking for is the financial strength of the carrier, which shows their ability to pay future claims, as well as an understanding of their past claims payment history,” said insurance agent David Carruthers, a director in Florida. Risk Partners in Valrico, Florida.
2. Increase your deductible
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Your deductible is the amount of money you will have to pay out of pocket before the insurance company gets involved. Raising your deductible may lower your car and home insurance premiums.
With auto insurance, for example, “increasing your deductible from $500 to $1,000 can reduce optional collision and coverage premium costs by 15% to 20%,” says Loretta Worters, vice president of the Insurance Information Institute. .
But if you raise your deductible, you should have enough money in your emergency fund to cover it.
3. Adjust your coverage
If you've been with the same insurance company for several years, you may have made changes to better protect your home from risks — for example, a new roof, hurricane windows, or a security system — since getting the policy. Experts say updating your coverage to reflect these changes could save you money.
Reducing coverage on certain items, such as jewelry or art, can also lower your homeowners insurance premium.
Dropping collision and/or comprehensive coverage for older cars can also cut costs. You may want to consider dropping coverage if your car is worth less than 10 times your premium, according to the Insurance Information Institute. But this means that you will have to pay for any damages out of pocket if you get into an accident or your car is damaged due to weather, theft, or any other non-collision event.
“You may be responsible for paying for those damages to other property that your insurance company doesn't cover. So, you know, there's some risk and reward there,” said Rod Griffin, a senior manager at Experian.
Mike Spearing carries Francesca Spearing as he stands in floodwaters around his home after record rainfall in the area on April 13, 2023 in Hollywood, Florida.
Joe Rydell | Getty Images
However, experts say having enough insurance and the right type of coverage may save you more money in the long run. Saving on insurance premiums can end up being expensive if you don't have the type of insurance you need, such as flood insurance.
Just one inch of water could cause about $25,000 in damage to a property, according to the Federal Emergency Management Agency. However, most homeowners insurance explicitly excludes flood damage, and few people seek this coverage. On average, about 30% of American homes in areas most at risk of flooding have flood insurance, according to the Wharton Risk Center at the University of Pennsylvania.
Experts say you may need flood insurance even if you're not in a high-risk area.
“A lot of people aren't buying it because their banks aren't asking them to, and all of a sudden, a hurricane comes along. They're not in a flood zone, according to the map, and we have a storm surge. There are all kinds of claims that go undetected,” said Carruthers of Florida Risk Partners. “About her.”
4. Look for potential discounts
One of the most touted deductibles is pooling coverage. You've probably seen many ads about purchasing home and car insurance from the same insurance company to save money, but experts say that's not always the case. You may find better rates using different companies.
“It's really a good idea to investigate both angles — assembling, not assembling — and always talk to your agent before making major changes to your home or expensive changes that you think will save you money,” Bankrate's Martin said.
Homeowners may receive rebates in exchange for being exempt from claims for a certain period of time, or installing features that better protect their homes from hazards.
Car insurance discounts range from safe driver and good student discounts to taking a defensive driving course. There are also discounts for older drivers and low mileage discounts for driving fewer than average miles.
5. Maintain your credit score
Your credit history can also affect your auto and home insurance rates. The higher your credit rating, the less you may pay for insurance in states where credit is a rating factor for insurance companies, experts say.
Bad credit can significantly increase insurance costs. For example, drivers with poor credit pay $4,349 annually for full coverage insurance compared to drivers with excellent credit who pay $2,033, according to a Bankrate report.
6. Determine insurance costs early
Factor insurance costs into your housing or car budget from the beginning. Pricing policies early on can help you avoid sticker shock at the point where it's difficult to back out of a purchase.
Also, when purchasing a home, consider the potential for severe weather for the potential property, which may mean you have more limited options from insurance companies and face higher rates for coverage. Some websites, such as First Street and Climate Check, can give you projections of the impact of extreme weather events on your home through 2050.
“You always put yourself in a stronger position to price your insurance before you get involved emotionally and financially,” Martin said.
—CNBC producer Stephanie Do contributed to this story.
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