Conducting a Home and Auto Insurance Review

Many consumers are shocked when they receive their annual insurance bills.  Rates for auto and homeowners’ insurance are climbing significantly.  Auto rates increasing 20% isn’t uncommon and homeowners probably isn’t much less especially if you live in an area that see extreme weather events.

So why is this happening?

The biggest driver of this is the increase in prices of cars and homes and the costs to repair them.  It costs much more to repair newer cars.  I heard an example recently that said replacing a bumper used to cost a few hundred dollars.  Now with all the cameras and tech integrated into cars it’s several thousand dollars.  For home insurers, costs associated with extreme weather events have been increasing.  Couple that with rising home prices and the demand for housing and you’ve got a recipe for higher costs.

So why is this happening now?

Insurance is a regulated industry.  Each state insurance commissioner sets rates based on the requests from companies.  This means it operates on a lag.  During COVID, claims dropped because people weren’t driving as much.  The insurers made more money.  As the pandemic eased, claims increased to higher levels than pre-pandemic.  This lowered insurance company profitability.  They have now gotten the insurance commissioners to increase rates and as your individual policy comes up for renewal it’ll probably mean higher rates for you.

What can you do?

You could consider shopping for another company, but this is typically not an individual company thing.  Rates have increased nearly across the board.  It doesn’t mean you shouldn’t compare.  Just don’t expect huge savings.

Review Your Coverage

You can also review your coverages.  This is important to do at least every few years.  You can download the 2-page checklist (link), but here are a few things to consider.

Homeowners Insurance & Personal Property

Has your home increased in value? 

There are nuances in the insurance rules that require you policy to cover < 80% of the value.  If your policy doesn’t, you could only get partial reimbursement for any claims.

What’s your deductible?  Can you raise it?

I’m a big fan of higher deductibles.  They can reduce your premiums because you’ll be less likely to file a small claim.  If you’ve got a proper emergency fund, this is something you could assess to determine if it’s right for you.

Have you made big improvements to your home? 

If you’ve finished the basement, built an addition, or added a pool, you’ll want to make sure these improvements are fully captured in your policy.

Do you have personal property (jewelry, electronics, antiques) that has value beyond the standard policy limit?

If so you may need to add a specific policy provision to cover it.

Auto Policy

Are your collision and comprehensive limits adequate based on the value of the vehicle?

It used to be that once cars reached a certain age, you could consider not having comprehensive coverage because they weren’t worth very much.  With the increase in the value of even very old cars, this probably isn’t as much the case any more.  It can still be a good thing to assess periodically.

Can you raise your deductible?

Do you have kids on the policy?

They may be able to qualify for good student discounts.  If they are only a part-time driver because they are away at college without their own car, they may get a reduced rate.

Umbrella Insurance

Once you amassed a certain level of wealth, it can be important to consider adding an umbrella policy.  Umbrella policies provide protection over and above your homeowners’ and auto policies.  Umbrella policies are relatively cheap for the amount of coverage you can get.

Discounts

If you’re talking to your insurance carrier about your policy, ask them about discounts you might qualify for.  There is the standard bundling discount for multiple policies, but there are many others from having home alarms to not having any claims for several years to multiple car discounts.

Wrap Up

With the increase in the cost of insurance, now could be a great time to review your policies to see if there is a way to save some money.  While I’ve hit the highlights, this checklist (link) has some other information you should consider.

Want to talk about your insurance or any other financial topics?  Contact a MFAA member today.  You can find the list of MFAA Advisors here.