Inflation at home
Most of us have heard more than we could possibly want about inflation and interest rates over the last few years. Some inflation has stayed around longer. Housing costs are among the things still causing pain for many budgets as home prices have stayed high, while mortgage rates remain at levels that haven’t been common since the 1990’s.
One area we haven’t talked much about is inflation in homeowner’s insurance. Why is that? Well, there are a few reasons. First, if you have a mortgage on your property, your lender likely requires you to have it. Since it is required, many of us don’t scrutinize as much as with some discretionary purchases. Second, many of us have our homeowner’s insurance paid via escrow as part of each monthly mortgage payment we make. That gives a bit of an “out of site out of mind” effect for some people since it is just one part of their monthly payment along with principal, interest, and often also the property taxes.
While we may not be actively thinking about homeowner’s insurance month to month, it may be having a bigger impact on your budget. Over the last several years, the costs of homeowner’s insurance has increased fairly dramatically in many areas. We are concerned with some of the developments we have seen where insurance companies are increasing premiums by double-digit percentages over the last few years. We have also seen some companies stop writing new policies in certain states, and some companies leaving states entirely even for their existing customers. Why is that happening? There have been increased large claim events for things like devastating tornadoes, hailstorms, hurricanes, and wildfires that we have all watched on the news in recent years. While there seem to be increased large scale claim events, costs for repairs have also increased over the years.
With all these challenges in the homeowner’s insurance market, what should consumers be doing today?
- Start by reviewing your current policy:
- How much are you paying?
- Is the replacement cost listed for your home still adequate for today’s construction environment?
- How long has it been since you looked at other options?
- Consider bundling with other coverages.
- Most of our clients have cars, some have boats, some have an RV, many have a vacation home, some have rental properties, hopefully most have umbrella coverage. Are they all through one carrier to take advantage of bundled pricing discounts?
- Shop around with multiple carriers
- It is easy to just ask your current agent if your coverage needs any updates or if you could bundle. Is your current agent captive to one insurer? Or will they shop around with multiple carriers to find you potentially better coverage or lower prices?
As you review, make sure the insurance company you use has solid financials and you don’t regret due to other long-term financial implications.
- Consider higher deductibles if you can afford them.
- Increasing your deductible can lower your premiums. If you do not have frequent claims on your policy, this may lower your total costs over time - this is also a good idea on review of auto policy deductible levels.
- Consider state or federal programs that may apply to your situation or area (e.g., National Flood Insurance Program, etc.)
- Check to see if your employer’s benefits offer any insurance discounts through any partnership programs?
- Are there any organizations you can utilize for discounts such as AARP or others?
- Work on increasing your credit score, as customers with good credit scores generally get lower insurance premiums than customers with less than favorable credit scores.
The next time you buy a vehicle or make your mortgage payment with your insurance escrowed, you might want to take a moment to consider if your property & casualty insurance is giving you everything you need, at a reasonable price. If you haven’t looked at it for a while, it may be worth reevaluating.
Anders, Jean, Kurt & Molly