Know How Interest Rates and Inflation May Impact Your Insurance Costs (2022)

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You’re not alone if the cost of your insurance has increased recently. Numerous economic variables have led to an increase in premiums for health insurance, homeowners insurance, and auto insurance. Nevertheless, despite increased insurance costs, there are still methods to save money.

How the cost of insurance is being impacted by inflation and rising interest rates

Everything is becoming more expensive due to inflation, and insurance providers are passing these increased costs along to the customer.

According to Brian Pattillo, vice president of Goosehead Insurance, “inflation affects the cost for insurance companies to pay off a claim, when both supplies and labour become more expensive.” “The same collision that cost your car $1,500 in damage last year could cost you hundreds more this year. A few years ago, a totaled car would have been replaced for $8,000, but today, it will cost a few thousand more.

He stated, “In order to pay claims, insurers must invest the money they get from premiums in order to pay out subsequent claims. The value of these fixed income investments has decreased, thus the corporation must earn more revenue to cover the costlier claims. The only way to close that gap is to raise customer premiums.

According to Pattillo, the cost of insurance has grown by an average of 7% for both new business and renewals.

The real effects of rate changes, he added, “may, however, vary considerably at the state level.” For instance, rates are rising by double digits in the North Texas market whereas they may only rise by low single digits in Central Texas.

In every state, this will hold true. Insurance companies are experiencing profitability problems as a result of having to pay more on claims due to increasing pricing, therefore they are responding by hiking consumer rates.


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How to Reduce Insurance Costs in the Face of Inflation and Rising Interest Rates

“Consumers are revisiting every aspect of their home budget in this inflationary environment. You can still find something more cheap simply because your prices with your current insurance carrier are rising; you just need to take advantage of all your options, Pattillo advised.

This can entail looking at alternatives from less well-known insurance companies.

Since these businesses are frequently the most expensive, Pattillo noted that many consumers tend to start with well-known brands. It’s important to compare a wide range of possibilities because there are more than 400 insurance firms in the US that offer home or auto insurance. The best way to achieve it is to get in touch with a free agent who will shop for them. Online shopping is permitted by certain independent agencies, but be cautious because there are many sites that appear to compare rates but are actually selling your data.

What Consumers Should Consider When Comparing Insurance Quotes

Finding the cheapest insurance coverage may be alluring while searching for coverage, but doing so may wind up costing you more in the long run.

Pattillo advised clients against eliminating essential coverages because doing so could put them in a financially disastrous situation in the case of a claim. “More than 60% of consumers obtain insurance through so-called’single carrier’ platforms. Companies like State Farm, Farmers, or Allstate are examples of this, where its agents often exclusively represent one choice. These companies don’t negotiate rates, so if you call to save money and have used every available discount, your only choice is to have your coverage reduced. In most cases, the compromise is not worthwhile.

Contact a private agency instead.

According to Pattillo, “an independent agency can make sure you are adequately covered and then shop across dozens of carriers to get you the most affordable pricing.”


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