Over the last few years, there’s been an observable increase in claims being made on home and car insurance. It may be because of the increase of natural disasters, a rise in the number of road accidents, or other unexpected situations like water damage or hail, but more and more people are turning to their insurance policies for help. But what does this imply for your premium rates? Sorry to say, but as claims go up, insurance costs also go up. And the unfortunate part? These costs usually trickle down to you, the policy holder, in the form of increased premiums.
What’s Behind the Increase in Claims?
There are many reasons why claims are on the rise specifically for home and auto insurance. Let us look at some of the main causes:
- Natural Disasters: Over recent years we have experienced an increasing number of wildfires, hurricanes, floods, and extremely damaging hail in which our changing climate is partially responsible. For instance, wildfires in places like California and Colorado have resulted in extensive damages which necessitated most homeowners to file claims on their home insurance. The greater number of houses destroyed or damaged means higher amounts that insurance firms must pay out. This consequently increases the overall cost associated with providing homeowners coverage.
- More Auto Accidents: These days, auto accidents have been on the rise due to an increase in the number of cars on roads and distracted driving. This has resulted in a spike in auto insurance claims. Every claim, whether minor or major, adds to insurers’ financial pressures.
- Escalating Repair Costs: Additionally, it is worth noting that repair costs for homes and vehicles have also increased. The rising complexity of modern cars with integrated technology drives up their repair costs. Similarly, building materials for homes are now more expensive, thereby increasing the expense that insurers bear for repairs and replacements.
- Legal Charges: Along with this, legal challenges are also higher when many cases are filed. The litigation costs incurred by insurance companies continue to go up as they involve themselves in disputes regarding indemnity sums or fault related issues–especially when talking about critical car accidents or huge wreckage at residential buildings.
What Is the Effect on Your Premiums?
While contemplating these factors, we need to discuss the effects of such on your insurance premiums. Liberty Mutual Insurance and Nationwide Insurance are two out of a number of insurers that have experienced claims increases, which have necessitated adjustments to their premiums to cater to the potential of future claims while still staying profitable. This is how it works:
- Spreading the Risk: When a claim is made by one insured person, his or her indemnity is contributed to by all others with policies. So, when there is an upsurge in claims, insurance carriers have to add more money into the pool to ensure everybody can be covered. Consequently, all those without any claims are forced to pay higher premiums.
- Higher Risk, Higher Premium: If you live where natural disasters occur or if you drive on roads which have a history of frequent accidents, then you should expect significant hikes in your premium rates. Insurers assess each policyholder’s risk and adjust their premiums accordingly. Hence, if your area has been hit with numerous natural disasters lately, then chances are you may now be regarded as a high-risk to insurers, which then results in higher premiums.
- Rising Expenses for Settlements: As costs for repairing homes and vehicles go up, each claim by insurance companies will require more money. To compensate for these growing expenses, they usually have to raise premiums. For instance, if the cost of mending a damaged car has escalated by 10%, your auto insurance premium may be raised to cover this hike.
Can You Do Anything About It?
Premium hikes might look like something that is unavoidable; however, there are measures you can take in order to control expenses and ensure that you get yourself the best possible deal on home or auto insurance policies.
- Compare Prices: Don’t just accept the first offer that comes your way and don’t limit yourself based on price from one company only. Spend some time comparing rates from different carriers. You could find out that a different insurer charges less than the previous one for an equal amount of coverage. This is where it’s crucial to partner with an insurance broker, like Risk Management Partners. We have the ability to shop your insurance with multiple carriers, getting you the best price and the best coverage.
- Combine Your Policies Together: There are times when insurers give discounts if their clients bundle their home and auto policies together. By doing so, it becomes feasible to cut both premiums by a significant percentage.
- Increase Your Deductible: If you are able to afford a higher deductible in the occurrence of an accident, your premium could be lowered. Ensure you have enough savings for any deductibles that may require filing a claim.
- Make Use of Sales and Offers: Many insurance companies usually give discounts for customers who have good driving records, home or car safety features or installations, or just have been with them for a long time. Make sure you inquire with your insurance rep about available discounts.
- Reconsider the Insurance Coverage You Have: You should avoid paying for useless coverage. For instance, when your car has gotten on in age and its value is less than it would cost to repair it, maybe it’s time to think about getting rid of comprehensive and collision insurance and keeping only liability coverage. Similarly, check if your home insurance meets all the requirements.
The Future of Insurance Premiums
As claims continue to rise, insurance premiums are more than likely to follow suit. This can be irritating to all of us, but it’s important to remember that insurance is a means of saving you from the worst when disasters or accidents strike. Paying slightly more money now could save you from a serious financial burden in the future.
Insurance firms such as Liberty Mutual, Travelers, and Allstate are constantly analyzing the risks and costs involved in offering coverage. While they strive to make premiums affordable, they must also be able to pay out on claims and remain viable. These fluctuations in insurance premiums reflect this risk/cost balance.
Due to an increase in claims, pressure on insurance companies has also increased to be able to pay out for those claims while also maintaining business growth. Though it seems burdensome, there are reasons behind such increases. You can manage your insurance costs by shopping around, bundling policies, and taking advantage of discounts available to you.
Just a reminder that insurance is designed to safeguard your life and possessions. Even if increasing premiums are not ideal, they enable your ability to bounce back after a catastrophe. Ensure you get all the details, reexamine them with your agent, and go through every one of the carriers for the best alternatives for your circumstances.
