As with anything else, insurance rates increase as time marches on. In fact, rates are often affected just as much by inflation as anything else you might buy.
Unfortunately, this means that the cost of premiums and policies will continue to rise. How much these rates increase depends on circumstances ranging from neighborhood growth to the world stage.
Replacement Cost Affects Insurance Rates
The first thing that you should consider is how replacement costs work. This is much different than the purchase price of your home or auto.
The replacement cost includes materials needed to “replace” the property, the cost of labor, and other elements to make it whole. If the cost of wood goes up, so will the replacement cost.
If your policy was frozen at the replacement costs from 20 years ago, it would be short. The end result is the costs coming out of your pocket.
As you can see, this kind of increase is good as it reduces how much you’ll have to pay in the event of an emergency, I recorded talking about replacement cost versus purchase or market value on your home, click here to watch the video.
Home and Auto Rates are Similar
Houses are not the only types of property that may have an increase. Insurance rates for automobiles go up as well.
In order for an auto to become “whole,” you’ll need the cost of materials and labor. Nowadays, this can also include a variety of technological advancements, such as rear cameras, sensors, and the wiring to make it all work.
In some cases, insurers will also consider things like the cost of medical bills when making adjustments. So, if the cost of medical care goes up, so do insurance rates.
Like ripples in a pond, anything affecting specific industries will take a toll on many. For example, the cost of computer chips will impact the cost of replacing the cameras I mentioned earlier.
What Can You Do to Lower Insurance Rates?
Depending on the type of property, there are quite a few methods at your disposal to reduce rates. The first thing you should do is ensure your policy is correct. If you’re paying for something you don’t need or have scheduled, it’s a waste of money.
A few other ways to decrease insurance rates include:
- Preventative measures. Fire alarms, anti-theft devices, safety features, and other preventative add-ons often work to reduce home and auto insurance premiums.
- Keeping claims to a minimum. The more often you have to file a claim, whether it’s for the home or auto, the more you’ll pay. This is because insurance providers will see you as a high-risk factor.
- Shopping around. You can always look around for a lower-cost insurer. However, keep in mind that low cost doesn’t mean superior service.
Insurance Rates Are Part of the Cost of Living
Sure, insurance companies need to make money. Otherwise, they would be out of business. However, not all increases in insurance are the result of greedy CEOs or banks.
Sometimes, increases are simply the result of an increase in the cost of wood or other materials.
At Vargas & Vargas Insurance, we can help you find affordable rates and plans throughout our network. Contact us today to see how we can help you save money on home and auto coverage.
After all, we may help you keep more money in your pocket to cover the other cost-of-living expenses.