Insurance premiums are determined by many things. Not in any particular order, here are some of the reasons your insurance bill seems to be going up all the time, and what you can do about it.
1. Losses
When you have a loss (claim) the company pays out some of the premium it has collected from you and everyone else it insures to cover that loss. If there are many small losses or even one big one, the premium pool has to be big enough to pay out the claim. You can imagine the untold billions a company needs to be able to pay out when a hurricane wipes out 20,000 homes and businesses. That money comes from all of us. Another way to look at the homeowner’s premium is to divide your annual premium into the full cost of a total loss. For example, if your home’s replacement cost is $250,000 and you lose $100,000 of personal property, the full loss is $350,000. If your premium is $1000 per year, you would have to pay that $1000 premium for 350 years in a row to equal what the insurance company would pay you tomorrow if a loss of that size happened. Something to think about. What can you do? Make sure to make a claim only when it is totally necessary. Talk to your agent for advice BEFORE submitting any claims.
2. Age
Simply put, the younger crowd tends to have more accidents than people that have more “experience” in life. As a general proposition, they exhibit riskier driving behavior and have more accidents as a result of it. Texting and driving have cost insurance companies BILLIONS of extra dollars in losses they didn’t plan for. This will cost all of us more money over the following years because we all pay premiums to be able to cover the few that have accidents. With more accidents happening and the nature of them being more serious than before, we need to pay more into the pool of money to be able to cover the increased number and severity of losses. Not much you can do on this besides waiting. Auto premiums start to relax as you get older and most companies consider you a youthful operator until you are 25 years old.
3. Credit
Somewhere along the line, someone equated poor credit history to having a higher risk profile. Most companies factor in credit history for this reason. What can you do? Especially for insurance companies, make sure to pay your bills on time. Most companies will not reinstate you after going out of force for nonpayment more than a couple of times. Not having continuous insurance (getting canceled and not replacing it) also drives your premiums WAY up.
4. Location, location, location
Where you are makes a difference since a more populated area means more cars and a higher possibility of accidents. What can you do? Relocate to a place with less population density. You can get quotes for different zip codes easily from your agent.
5. Deductible choice
Years ago, people were able to get 250 or even 100 dollar deductible on their homeowner’s policies. Today, most companies have a minimum deductible of 1000 dollars for homeowners. There are a few exceptions, but most companies are at 1000 or above because insurance contracts should be considered catastrophe policies, not a home
maintenance program. For example, if you have a tree laying in your living room, you are likely to have a claim. If a few shingles blow off in a windstorm, that’s really not a claim. Higher deductibles save you more money because it puts a larger dollar amount for you to cover before an insurance company will have to pay out. The moral of the story is to save claiming on your insurance for the big ones.
The costs of repair/replacement of your car or property increases each year due to inflation and increased labor and material costs, so the company has to be able to collect more money to cover those ever-increasing costs.
At Security Insurance, we specialize in helping people understand insurance and find coverage that’s uniquely suited to their needs. Contact us today for a free consultation.