It is expected to see home and auto insurance rates rise in 2022.
Thanks to an unusual convergence of market trends, ushered in by the pandemic and other disruptive events, you may see a bigger change to the cost of your home and auto insurance than usual when it comes time to renew your policies this year.
Insurance rates are based on what an insurer thinks it will cost to make you whole in the event of a loss – whether it’s roof damage during a windstorm or a vehicle totaled during a traffic accident. As you’ve likely noticed, pretty much everything costs more than it did even a few years ago.
What’s driving higher home insurance costs
According to a January 2022 article in the Washington Post, home insurance premium rates are up 11.4 percent on average since 2017.
If you’ve shopped at Home Depot or Lowe’s lately, you’ve certainly seen that the price tags on building materials have risen dramatically. Last year alone, the cost of building materials rose 14.1%, with lumber playing an outsized role in that trend, more than tripling in price since March 2020.
To make matters worse, the home-building industry is facing a shortfall of at least 200,000 skilled laborers, which is driving up construction-related labor costs. Combined with the high cost of construction materials and historically low housing inventory, this has been making home claims much more expensive for insurance companies.
What’s driving higher auto insurance costs
According to Bankrate.com, extensive research is showing that in 2022, the average cost of car insurance will probably rise for many drivers.
An ongoing shortage of microchips and other critical parts like wiring harnesses, plastics and glass is making it more costly to repair or replace a vehicle after an accident.
Supply chain issues are rapidly depleting inventories of new and used cars. Inventories have reached a critical low-point, falling 87% between 2020 and 2022. As a result, the average price of new cars has risen 14% over the same period, while used car prices have skyrocketed 55%.
At the same time, accidents have become more frequent and severe, increasing the number and cost of auto claims. In the first six months of 2021, nearly 2.5 million people sustained injuries requiring consultation with a medical professional. Accident fatalities in Jan. 2022 were 14% higher than in Jan. 2020.
Focus on value as you explore ways to save
Keep in mind that savings comes in many forms. The value of the coverage you choose today may save you more in the long run than the lowest possible premium.
Is it possible to avoid increased insurance costs?
Now is a good time to look for ways to save money on your insurance premiums. Some steps that you can take are:
1. Review your current policy. Taking a closer look at what you have is an important first step in understanding your insurance costs. Ask us to go over all of the coverages and explain what they represent.
2. Ask if shopping for a different carrier makes sense. Not all rates are the same among insurance carriers.
3. Double check that you are getting all of the discounts that you are entitled to. Multi-policy discounts (home + auto both with us) is a major way to save money.
4. Consider opting for a larger deductible. This will cost you more out of pocket in the event of a claim, however it will likely save a good chunk on the yearly premium.
Contact us to review your current coverage. We’ll help you explore opportunities for discounts that could offset higher rates when it comes time to renew.
Sources: National Association of Realtors, Federal Reserve Bank of St. Louis, Home Builders Institute, National Association of Home Builders, Nasdaq, U.S. Department of Commerce, Consumer Price Index, National Safety Council, New York Times, Washington Post, Bank Rate.