Why is the Cost of My Home and Auto Insurance Increasing?

November 15, 2022 · 6 minute read · Personal Lines

Blog Why is the Cost of My Home and Auto Insurance Increasing?

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Even with proper home maintenance and a clean driving record, drivers and homeowners may be seeing an increase in their insurance rates. There are many factors that affect the cost of insurance. In this article, we’ll discuss why rates are increasing and how you can keep your insurance premiums at an affordable rate.

Price Increases for Homeowners

In a recent survey by SafeHome.org, 43% of homeowners indicated their insurance premiums have increased in the past year, rising to an average of $1,584. Let’s take a look at what is causing this increase.

Claims

If you file a claim on your home insurance, this may cause your premium to increase temporarily. The amount your premium increases after filing a claim depends on several factors, including:

  • Your personal claims history
  • Type of claim
  • Degree of damage
  • Where you live

The cost of your home insurance may also increase based on claims in your area. For example, if extensive damage occurs in your community due to a major hail storm, your rate may increase along with the rate of everyone else in your area.

Loss of Discounts

There are a variety of discounts that can be applied to your insurance to help bring your rate down. If you are seeing an increase in your insurance premium, here are a few discounts you may have had that are no longer in effect.

  • Advance quote discount. This discount can be applied to your policy when you first purchase insurance and is typically reduced/removed over time.
  • New roof credits. As the roof on your home ages, this discount will start to decrease each year at renewal. If you have recently replaced your roof, let your insurance agent know so this discount can be renewed on your policy.
  • Newer home discount. As your home ages, this discount will decrease each year at renewal. If you have made recent updates to your home (e.g., electrical, plumbing, heating), talk with your insurance agent about discounts for upgrades that may apply.
  • Claims-free discount. The longer you go without filing a claim on your homeowners policy, the more you will be able to save on your insurance with a claims-free discount. Most insurers will apply this discount after you have been claims free for three to five years. If you file a claim, this discount will no longer apply until sufficient time has passed after the claim.

Increased Reconstruction Costs

Due to supply chain issues, construction labor shortages, and record-high inflation, the cost of repairing and rebuilding homes has increased substantially from 2020 through 2022. This has had a direct effect on the cost of homeowners insurance – the higher the replacement cost of the home, the higher the cost of the insurance.

With increased construction costs, do you have the right amount of coverage on your homeowners insurance? Learn more here.

Increase in Natural Weather Disasters

Over the last few years, the home insurance industry has experienced record-setting claim payouts and financial losses due to a higher occurrence of more extreme natural disasters. These disasters include hurricanes, tornadoes, wildfires, flooding, and other severe weather. In 2021, there were 20 separate billion-dollar natural disasters in the United States – costing a total of $145 billion.

The increase in costly natural disaster events, combined with increasing construction costs, is triggering increases in the cost of homeowners insurance.

Price Increases for Drivers

Price increases on auto insurance are affecting many drivers. Some factors that affect auto insurance rates are specific to your policy (e.g., driving violations, claims, young drivers on your policy, type and age of vehicles you drive, etc.), while other factors – inflation, parts and labor shortages, and an overall increase in accidents – are affecting most drivers.

Driving Violations

Just one driving violation can increase the cost of your auto insurance by an average of 35%. Even seemingly minor infractions can be costly as well, with a speeding ticket adding an average $422 per year to your insurance. It varies by state, but most types of driving violations will be added to your driving record, and insurance companies have access to this information. A violation can be used to justify an increase to your monthly bill, and your insurance company may choose not to renew your policy when it expires if you have serious violations on your record.

Claims

An accident can be even worse for your insurance rate than a driving violation. While most insurance companies will raise your rate after an at-fault accident, the amount can vary based on your insurance company, the state you live in, and the damage you cause in the accident.

Learn more about how an auto accident impacts your rate in this article.

Adding Young Drivers to Your Policy

Teenage drivers cost more to insure as they have a higher rate of accidents and file more claims compared to the average driver. According to the Insurance Information Institute, adding a teenage driver to your insurance policy can increase your insurance costs anywhere between 50 to 100 percent.

Keeping teens and young adults’ attention focused on driving and eliminating other distractions can have a positive impact on their safety. Take the time today to talk with your teens and remember to lead by example.

Check out these articles for tips on teaching teens best practices for driving:
Teens and Distracted Driving
Top 10 Distracted Driving Points

Adding Newer/More Expensive Vehicles to Your Policy

Newer vehicles and more expensive vehicles cost more to repair and replace. Newer vehicles have more advanced technology, such as backup cameras and blind spot detection sensors. These sensors are easily damaged and require a trained technician and specialized tools to replace. This has led to an increase in repair and replacement costs, even for something as simple as a bumper or windshield.

Increase in Accident Frequency

The number of drivers on the road is returning to pre-pandemic levels. This increase in traffic coupled with reckless behavior – drug and alcohol use, excessive speed, distracted driving, and lack of seatbelt use – is leading to an increase in accident frequency, resulting in an overall increase in insurance rates across the industry.

Parts and Labor Shortages

As with the construction industry, the vehicle industry has also been affected by labor and supply shortages leading to an increased cost to repair and replace vehicles.

According to TechForce Foundation, “The demand for transportation technicians outpaces supply by an estimated 5 to 1, leading to higher labor costs.” The combination of labor and supply shortages have led to led to a 6.3% increase in the cost of vehicle maintenance and repairs and maintenance between February 2021 and February 2022, as well as a 41.2% spike in used vehicle prices.

How You Can Lower Your Insurance Costs

From taking advantage of available discounts to mitigating risk, there are a variety of things you can do to help lower your insurance costs.

Tips for Lowering Your Homeowners Insurance Premium

  • Maintain a good credit history. Your credit information is taken into consideration when insurers price homeowners insurance policies.
  • Raise your deductible. Increasing your deductible from $500 to $1,000 could save you up to 25% on your insurance premium.
  • Insure your home and auto with the same insurance company to take advantage of multi-policy discounts.
  • Review your coverage on an annual basis. Are there items you’ve been paying to insure that have depreciated in value or that you no longer own?
  • Properly maintain your home so it is more disaster resistant, including creating defensible space, preventing water damage, and guarding against theft and intrusion.

Tips for Lowering Your Auto Insurance Costs

  • Consider a higher deductible to lower your premium.
  • Research insurance costs before you buy a new or used vehicle. If you know what to expect on cost, this will help guide you in purchasing a vehicle with an affordable insurance rate.
  • Ask your insurance agent about available discounts. Discounts are available for such things as multi-policy, good driver, good student, low mileage, and certain safety features.
  • Maintain a good credit history. Your credit score is a key factor in the rate you pay for auto insurance.
  • Practice behaviors that lessen your risk, including practicing defensive driving techniques and avoiding distracted driving.

For more ideas, view our article Saving Money on Your Insurance the Right Way.

We recommend reviewing your insurance at least once a year with your agent. They’ll ask the right questions to guide you to the coverage that will fit your needs. They’ll help you understand your policy, assess the rapidly changing replacement cost of your home, and ensure any available discounts are being applied to your policy.