Your Insurance Rates Keep Rising: Why? What Can You Do?

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Death and taxes. Oh, let’s add insurance, because, well, we all love to pay for our insurance policies, don’t we? And the cost just keeps increasing. Why does that happen, and what can you do about it? Read on, my friend.

“When I was your age, I paid a nickel to go see a movie!” Yes, thanks, Grandpa, for the titillating story about how inexpensive things were then and how they don’t seem worth the higher expense today. The first thing we have to recognize is that if all things remained the same, everything that costs $1 today would still cost $1 tomorrow, or in a year, or two or three, and we would see drastically less expensive insurance policies out there.

Point being, insurance companies are buying the same stuff we are. The bumper on your car that cost $200 to replace way back when now costs $2,500, in part thanks to all the fancy-schmancy cameras and sensors that have been added. So if it costs your insurer more, then of course it’s going to cost you more.

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“I bought this entire house on the beach for $40,000, and, man, it was a real struggle financially!” Yes, thank you once again, Grandpa, for the reminder of how the housing market has grown to the extent that unless you’re the offspring of a multimillionaire, buying a house in most of the country today is more challenging than convincing ants there is nothing to see there on that orange popsicle melting on the sidewalk. Houses cost more every year, and the cost to replace them or fix them when they are damaged — well, yeah, that goes up every year, too.

Don’t even get me started on the frequency of property insurance claims. Claim frequency and severity have been on a steep curve going up, up, up. When more claims are filed and paid, prices go up for, unfortunately, everyone.

Insurance companies need to make a profit

Some insurance companies are private companies. They are for-profit companies, meaning that they need to make money. Heck, some of them are publicly traded companies, and they have shareholders to answer to. Those shareholders are pushing them to make …. more …. money. So, like it or not, many insurers are forced to increase rates because if they don’t increase profits, their share value will decrease, which lowers their value, which eventually trickles down to them not having money to pay claims to begin with. Wash, rinse, repeat. And don’t think the mutual insurance companies out there aren’t under pressure to maximize their profit, because they are.

Remember how we talked about housing and how expensive it is? A large part of all property insurance claims is the cost for you to relocate while your damaged home is being repaired. The rent that may be required to keep a roof over your head could be insanely high. Home costs have been skyrocketing, and right there tagging along, like your annoying baby brother, is the cost to rent properties. Up. Up. Up. Sometimes far outpacing the rate of inflation, which has only recently begun moderating.

You may be thinking, “Thanks, Karl, for letting me know the cost of insurance will keep increasing. Really appreciate it.” OK, you may not be thinking that, but maybe you’d like to hear about some ways you can offset some of those increases. Here are some simple tips to lower your insurance premiums, whether it be for your home, condo or car.

1. Don’t file small claims.

Look, I get it, you pay your premium and want to get some of it back if you have a loss. (P.S., insurance is not a savings account, you shouldn’t be looking for a return on it, but I digress.) If you can afford to pay for a loss out of pocket (say, $5,000, though a “small” loss means different things to different people), then thank your lucky stars you can and write the check. Insurers subscribe to the “what have you done for me lately?” adage, and 20 years without a claim won’t mean diddly if you’ve filed two claims in the last two years.

2. Ask for discounts.

As phenomenal as we are in the industry — insurance agents, brokers, advisers, insurers, anywhere you go to purchase your insurance policies — we’re only human, at least for now. We may not know simply by speaking with you that you are a proud alum of a particular university. Yes, that can matter! Many insurers will offer discounts to folks with a college degree, but you can’t save the money unless you have the discount, and you can’t get the discount if you don’t ask for it and qualify for it.

I suggest using a phrase akin to: “Please tell me all the discounts you offer for this type of policy.” Asking that rather than, “Am I getting all the discounts I can?” is going to give you the best opportunity to find out what you can qualify for — because you know more about you than your insurance contact does.

Stay involved, stay educated on your insurance products and what they can do for you. It’s your money and therefore your insurance policy.

Looking for insurance-related tips by text? Shoot a text to 567-FORKARL (567-367-5275) or visit this page.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Karl Susman is a veteran insurance agency principal, nationally engaged insurance expert witness and broadcast host who translates insurance from jargon to judgment. For more than three decades, he's helped consumers, courts and policymakers navigate coverage, claims and compliance. As Principal of Susman Insurance Agency, Karl works directly with households and businesses to compare options and make clear, defensible coverage decisions.