There’s a reason your primary care doctor wants you to have an annual check-up. A lot can change with your health in a year…and a lot can change with your insurance needs. Just like your car needs a tune-up and your house needs a good deep clean occasionally, your insurance policies need to be evaluated to make sure they’re covering your current needs.
Things like improvements you’ve made to your home, changes in building costs for houses in your neighborhood, any claims you may have filed, etc. are all things that can affect your insurance premium. Your coverage needs may have changed, too, and your Alfa® agent can help you personalize your coverage to get you exactly what you need. Scheduling an annual insurance check-up with your agent is wise and recommended – and may even save you money, in some cases!
Economic factors like inflation can also have an impact on your insurance premium. If it seems like you can’t have a conversation these days without someone mentioning inflation, it’s because it’s affecting everything. The COVID pandemic catapulted the economy into the highest rate of inflation in over 40 years. The inflation rate was 7.5% in January of 2022 and continued to rise in February at 7.9% (TradingEconomics.com). And it doesn’t look like it’s slowing down anytime soon.
What exactly is inflation?
Inflation is how we measure the rate that prices for things increase. When prices rise, the inflation rate rises. As inflation rises, our spending power decreases – which means we get less “things” while paying more money for those “things."
The pandemic’s supply chain issues, lack of workers, resource problems and more created the perfect storm for this high spike in inflation. You probably first heard about it on the news – the experts started talking about the risk of inflation, but then it became real for you when you noticed how high those numbers at the gas pump got. And when you realized you could easily spend half your paycheck on a week’s worth of groceries, you started to get worried. But inflation doesn’t just affect our day-to-day spending. You’re likely to see inflation touch everything from your monthly bills to your insurance premium.
So, what does the inflation rate have to do with insurance? How is insurance affected by inflation?
A lot. Inflation affects the cost of building supplies, auto parts, home appraisals and more. Even labor costs and the cost of medical care may go up during times of inflation, as well. According to the Associated General Contractors of America,
"...between January 2021 and January 2022, the national average inflation rate on building materials and labor costs was 20%."
This means it costs the insurance company a whole lot more money to fulfill your claim. Some policies have a built-in inflation guard; but others will not account for the unprecedented rise in inflation we are currently seeing.
What is inflation guard?
Inflation guard, or insurance inflation protection, is an automatic annual adjustment to your property coverage amount to account for inflation. It’s applied each year when your policy renews.
This is great when inflation rises at a typical rate, but we’re currently seeing the inflation rate nearly double what is typical. Because of this, it’s possible that you’re underinsured. Call your agent today to discuss your current limits and how inflation may be affecting your home’s value. The last thing you want to deal with when faced with the tragedy of losing your home is finding out you don’t have enough insurance to replace it. Protect your financial investment with the right coverage and the right limits. Our agents are ready to help you.
Does inflation make my insurance premium go up?
It can, yes. Insurance companies look at many factors when determining what rate to charge. This includes things like repair costs for vehicles and homes. If those costs increase insurance premiums are likely to increase as well. Factors such as increased material and labor costs, computer chip shortages and increased auto repair and labor shortages are all contributing to increased costs in insurance.
Having the “cheapest” insurance you can get doesn’t feel like a great idea when you’re staring in the face of a total loss and are underinsured. The reason you have insurance is to rebuild your home if disaster strikes. It costs a lot more than it did last year to rebuild, so it only makes sense that property insurance is going to have to go up.
What are some other reasons, besides inflation, my home insurance premium could increase?
The value of your home increased, so it would cost more to rebuild. This could happen if you:
Your risk has changed. Such as:
- Increased the square footage
- Remodeled or updated kitchen, bathroom, or other rooms
- Finished your attic or basement
- Added structures such as a deck, patio, or porch
- You added a pool or trampoline
- You filed homeowners claims
Other than inflation, what are some reasons my auto insurance premium increased?
As always, your agent can help answer any questions you may have about your coverages, deductibles, and premiums.
- Speeding tickets or other traffic violations
- You caused an at-fault accident
- Increase in claims in your area (did you know that where you live impacts your auto rate?)
- Adding vehicles or drivers to your policy
- Ineligible for discounts you were previously receiving
How to save on your insurance during times of inflation?
First, don’t panic. Our local agents are here to help. Second, schedule an insurance check-up with your agent. He or she will be able to assess your coverage needs, make sure you’re getting the discounts you qualify for, and can help show you how adjusting your deductible can affect your premium payments.