How to Lower Your Insurance Rates
In this day and age, it is important to find ways to save money everywhere you can, even with your insurance rates! You may have seen that prices are going up on everything around you, with insurance premiums being no exception. There are a couple of reasons why your insurance premium rates are higher than normal. The biggest reason is inflation. The other reasons include all the factors that go into setting the base rate. Some of these things you can’t change, while others you can! Even if your premium rates have risen due to inflation, you may be able to do some things to lower costs.
First, we can try to understand how the rates are priced from the outset. Let’s look at what goes into figuring the base rate for insurance, taking inflation out of the picture. Then we’ll see how inflation has further affected those rates.
Insurance Base Rates
Insurance companies consider multiple factors when it comes to setting base rates before inflation is figured in. For example, a big contributing factor to home insurance is the climate. If you live in an area prone to natural disasters, your premiums might be higher.
For auto insurance, your driving record plays a big role in setting your premium rates. That’s something you can control! Other factors––such as your age––you can’t change.
When determining your auto insurance rates, companies look at several factors, including:
- Your age (young and old drivers are more expensive to insure)
- Your state
- Your driving record
- Your vehicle (is it very flashy and likely to be stolen?)
- Gender (young men are statistically more likely to get in an automobile accident, and are the most expensive to insure)
Similar factors affect your home insurance premiums as well. Some factors you can’t easily change, such as:
- Location
- The cost of your home
- The cost to potentially rebuild your home
- The age and condition of your home
While some factors you can affect, such as:
- Security features
- Your credit history
- Additional coverage
Inflation’s Impact
Now for the biggie. Everything costs more right now, from new cars to building materials. That means if a storm damages your roof in 2022, the roof will cost a lot more to replace than it would have in 2018. These price changes are then reflected in higher premiums paid by the customers.
The auto industry may see anywhere from a 6%-10% price increase for monthly premiums, though this varies state-to-state. This article from Bankrate has a great breakdown of the many converging factors that have led to this increase.
Health insurance premiums may see a hike in 2023 as well. Marketplace plans may go up by 10% in 13 states, and employer-based plans are on the rise, too.
The good news is that inflation is cooling down, and though it may not happen as quickly as we’d like, prices are likely to eventually drop as well. Or, at the very least, they won’t continue to skyrocket. Until then, make sure your dollars are getting you the best possible insurance policy!
What you can do to save
Across the board, one piece of advice sticks out: bundle your policies through one provider and compare multiple providers. The best prices change among insurance carriers so compare providers every year or two to find the best deal. This is almost guaranteed to get you the lowest rate on auto and home insurance policies that each company provides. Need a way to compare multiple carriers all in one place? Farmers Insurance Choice allows you to see multiple prices from multiple carriers. Check it out here!