Managing Rising Insurance Costs

Why are insurance costs rising?

A perfect storm of market trends has driven up the cost of building homes – and with it the cost of insuring them for repair and replacement. Auto repairs are much more expensive, requiring insurance companies to increase their rates.

Contributing factors of a hard market:

• Increased frequency of catastrophic losses
• Low inventory and increased demand for homes
• A shortage of skilled labor
• Higher material costs
• Fewer cars, higher prices
• Rising cost of medical care for injuries

Why did my auto insurance increase after I filed a windshield claim?

There’s some misinformation regarding “glass only” claims. First, any insurance claim paid can have an impact on your insurance score – which is used in rating. While a glass claim will not incur an at-fault surcharge on your policy, it’s still a claim paid. Historically, these claims were partially disregarded when looking at the claim history. With the increased cost to replace a windshield, this is no longer the case. When reviewing a new account (and even the renewal of a current one), all claims are considered.

The claim I filed on my home wasn’t my fault — why would my rate go up?

While it can certainly feel personal when this happens, it isn’t. Most claim-free home policies receive an automatic “claim-free” credit. Once there is a paid claim, this credit is removed. It’s not about fault or blame if your pipe breaks and causes water damage or if a monsoon causes damage to your roof. It does, however, remove the credit and it is a part of your claim history.

Why can’t I just move to another insurance company?

Sometimes, this is a solid solution; however, there is some risk involved as well. The current hard market is impacting the entire industry. Even if you secure what feels like a much lower rate, that’s likely going to change at your renewal.

A new policy is looked at more closely than one already in place. Most new home policies require an insurance inspection on your home. This is used to confirm information, determine the replacement cost (which will become your dwelling limit on your policy), and identify any insurance concerns that need to be addressed. These inspections are resulting in stricter requirements than we’ve seen in the past.

There is some benefit to loyalty. While the rules are very strict right now, there’s still some room for negotiation for a current, long-time client – much more so than a brand new one.

Finally, the most asked question: What can I do?

First, know that Leavitt Insurance Agency stands with you in this challenging time. Our team reviews every client renewal. We are in communication as a team, with our agency owners, and with our partner companies. Our goal is to provide our clients with the right solutions for their needs at a competitive price.

Tips for keeping your premium in line without sacrificing your most important coverages.

Increase deductibles. This is the best way to reduce premiums. By increasing your deductible(s) you are eliminating small claims and absorbing a larger portion of a significant claim. Consider a $5,000 deductible on your home and $1,000 or $2,500 on your auto.

Consider removing full glass coverage. Yes, windshields are a magnet for rocks; however, the cost of full glass coverage has gone up and it’s worth reviewing. In addition, if you’ve had a couple of windshields replaced in the past three years, you should be cautious about submitting another claim. In this case, why pay for the coverage if you won’t be using it? (Suggestion: before removing coverage, contact a glass company and find out the “cash price” of your windshield.)

Review your coverage on “other structures” and “personal property.” In most cases, these coverages are based on a percentage of your dwelling limit and are issued with a default of 20% on other structures and 70% on personal property. Many companies now offer the option to tailor these coverages to your needs. In some cases, we can look to reduce unnecessary coverage to lower premium.

Talk to us before submitting a claim. Aside from an emergency, call us first. While we can’t officially confirm or deny coverage, we are here to discuss the probability of coverage and the consequences of submitting a claim. We understand that claims cannot be avoided and there are situations that absolutely warrant submission; however, we want to have a discussion before you call the insurance company. (Once a claim is called into the insurance company, it will be part of your insurance history.)

Let us know of any changes in risk. Have you updated your roof, HVAC, plumbing, or electrical? Did you install a swimming pool? Are you about to start a remodeling project? Did you activate a fire/burglar alarm? Has a family member moved out of the house? Has a child gone away to school, over 100 miles without a vehicle? Does your child have a B average or higher? Our goal is to protect you. To do this, we need to be informed. Our primary purpose is to protect your risk at the time of a loss. We need to work together to make sure you are properly covered.

Understand that even a higher renewal may be the best renewal. We are seeing more non-renewals of coverage than ever. The reasons vary but include claim history and frequency, high hazard area, characteristics that no longer fit new guidelines of acceptability, and insurance company exit of the state. If you live in a higher risk area for wildfire or flood and receive an offer for renewal, please understand it may be your best option. Due to state laws, it’s easier for a company to restrict NEW policies than it is for them to non-renew policies in place.

Pay your premiums. Another challenge we’re facing is the lack of acceptance of payment on a lapsed policy. While companies need to follow state law for notice of cancellation and late payments, they are not required to accept a reinstatement payment after a certain date. If available, sign up for EFT/automatic payments. Most companies have online access to policy forms, bills, etc. Be sure to take advantage of this convenience to help avoid a non-payment cancellation. Once a policy has been cancelled for nonpayment, it adds another obstacle to securing new coverage.

Have questions or concerns? Feel free to reach out, and let’s make sure you have the right coverage for your needs.