The cost of insuring your most valuable things has risen dramatically. While general inflation has decreased, insurance expenses are becoming a larger portion of many households' budgets.
The average yearly rate for homeowners insurance rose over 20% between 2021 and 2023, with another 6% increase expected in 2024, according to Insurify, a virtual insurance agent. This would increase the average policy cost to $2,522 at the end of the year.
This surge in insurance costs has caught many homeowners off guard, forcing them to reassess their budgets and prioritize their expenses. Some families are finding themselves in the difficult position of having to choose between maintaining adequate coverage and cutting back on other essential needs. The ripple effect of these rising costs is being felt across various sectors of the economy, as consumers tighten their belts to accommodate the increased insurance burden.
Car insurance prices have also skyrocketed.
The average cost of motor vehicle insurance increased by 16.5% between August 2023 and 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 reasons contribute to rising house insurance premiums, including rising prices 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.
The insurance industry is also grappling with the challenges posed by emerging technologies. The rise of electric vehicles and advanced driver assistance systems has introduced new complexities in assessing risk and determining appropriate coverage. Insurers are having to invest heavily in research and development to keep pace with these technological advancements, which in turn contributes to the overall increase in premiums for consumers.
Still, there are methods to reduce growing rates. Here are six strategies to consider.
Look around for a new insurer.
Consider switching to a different insurance carrier. While most individuals continue with the same vehicle or house insurer year after year, experts recommend shopping around.
According to a recent Autoinsurance.com poll, around 37% of drivers indicate they would or have already obtained a quotation from a new insurer in reaction to rising insurance premiums, while 27% have or intend to switch insurance carriers.
Experts recommend shopping around for vehicle and house 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.
Even though significant weather disasters have had a negative impact on many insurers, firms are at various degrees of adjustment.
"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 coverage, acquire quotations from several insurers to compare pricing. To acquire rates from many 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. You may discover an agent in your region by contacting 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.
It's worth noting that while shopping around can lead to significant savings, consumers should be cautious about sacrificing coverage quality for lower premiums. Some insurers may offer attractively low rates by excluding certain types of coverage or imposing strict limitations on claims. It's crucial to carefully review policy details and ensure that the coverage meets your specific needs before making a switch.
Increase the deductible.
Your deductible is the amount of money you must pay out of pocket before the insurance provider steps in. Raising your deductible might 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.
However, if you raise your deductible, you must have enough money in your emergency fund to meet the cost.
Adjust your coverage.
If you've been with the same insurance provider for a while, you may have made improvements 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 might save you money.
Reducing coverage for certain goods, like as jewelry or artwork, may help decrease your homeowners rate.
Dropping collision and/or comprehensive coverage on older automobiles might also save money. According to the Insurance Information Institute, if the value of your automobile 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 repairs out of your own money.
"You may be responsible for paying for damages to other property that are not covered by your insurance carrier. So, you know, there's some risk and reward," explained Rod Griffin, a senior director at Experian.
However, experts advise that having adequate insurance and the correct type of coverage may save you money in the long term. Saving on rates may be 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 may cause around $25,000 in property damage. However, most homes insurance policies expressly exclude flood damage coverage, and few individuals seek it. According to the University of Pennsylvania's Wharton Risk Center, around 30% of U.S. households in the most 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 storm strikes. According to a map, they are not in a flood zone, but there is a storm surge and several undiscovered claims," said Carothers of Florida Risk Partners.
The increasing frequency and severity of natural disasters have prompted a shift in how insurers assess risk and price policies. Climate change has led to more unpredictable weather patterns, making it challenging for insurance companies to accurately forecast potential losses. As a result, many insurers are adopting more sophisticated risk assessment models that incorporate climate data and predictive analytics. This evolving approach to risk assessment is likely to continue influencing insurance rates and coverage options in the coming years.
Check for potential discounts.
Bundling coverage is one of the most commonly advertised savings. 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 discover better prices 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 savings for being claim-free for a set length of time or installing improvements that improve their home's protection against dangers.
Car insurance savings include safe driver and good student discounts, as well as taking a defensive driving course. There are additional savings for senior drivers and those who drive less than the average number of miles.
Maintain your credit score.
Your credit history might also affect auto and house 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 prices. According to Bankrate, drivers with low credit pay $4,349 per year for full coverage insurance, while those with great credit pay $2,033.
Estimate insurance expenses ahead of time.
Include insurance fees in your home or automobile budget from the outset. Pricing regulations should be established early on to minimize sticker shock when it becomes more difficult to back out of a transaction.
Also, before purchasing a home, evaluate the potential of harsh weather for a prospective property, which might result in a more limited choice of insurers and higher coverage costs. Some services, such as First Street and Climate Check, can forecast the impact of extreme weather occurrences on your property until 2050.
"You're always putting yourself in a stronger position to price out your insurance before you get emotionally and financially involved," Martin told me.
As the insurance landscape continues to evolve, consumers are increasingly turning to technology-driven solutions to manage their coverage and costs. The rise of insurtech companies and AI-powered insurance platforms is offering new ways for individuals to customize their policies, file claims more efficiently, and potentially reduce their premiums. These innovations are not only changing how consumers interact with insurance providers but also putting pressure on traditional insurers to modernize their operations and offer more flexible, personalized coverage options.
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