Why Do Insurance Rates Increase Over Time?

Like anything else, insurance rates increase over time. In fact, rates are often affected by inflation as much as anything else you can buy.

Unfortunately, this means premiums and policy costs will continue to rise. How much these rates rise depends on circumstances ranging from neighborhood growth to the global stage.

Replacement costs affect insurance rates

The first thing you should consider is how replacement costs work. This is much different than the purchase price of your home or auto.

Replacement costs include materials, labor costs, and other components necessary to “replace” the property. If the price of wood goes up, so will the cost of replacement.

If your policy has a replacement cost freeze from 20 years in advance, it will be shortened. The end result is the cost coming out of your pocket.

As you can see, this type of increase is good because it reduces how much you have to pay in an emergency.

Home and auto rates are similar

Homes aren’t the only property that can grow. Insurance rates for automobiles also go up.

“Finishing” an auto will cost you materials and labor. These days, it can also include various technological advances, such as rear cameras, sensors and wiring to make it all work.

In some cases, insurers will also consider factors such as the cost of medical bills when adjusting. So, if medical costs go up, so do insurance rates.

Like ripples in a pond, something that affects certain industries will affect many. For example, the cost of computer chips will affect the cost of replacing the camera I mentioned earlier.

What can you do to lower insurance rates?

Depending on the type of property, there are several methods at your disposal to reduce the rate. The first thing you should do is make sure your policy is correct. If you’re paying for something you don’t need or deserve, it’s a waste of money.

Some other ways to lower insurance rates include:

  • Preventive measures. Fire alarms, anti-theft devices, security features and other preventative add-ons often work to lower home and auto insurance premiums.
  • Keep demands to a minimum. The more often you have to file a claim, whether it’s for a home or an auto, the more you’ll pay. Because insurance providers will see you as a high-risk factor.
  • Shop around. You can always look around for a low cost insurer. However, keep in mind that lower cost does not necessarily mean superior service.

Insurance rates are part of the cost of living

Of course, insurance companies need to make money. Otherwise, they will be out of business. However, not all growth in insurance is the result of greedy CEOs or banks.

Sometimes, the increase is simply the result of an increase in the price of wood or other materials.

At Vargas & Vargas Insurance, we can help you find affordable rates and plans across our network. Contact us today to see how we can help you save money on home and auto coverage.

Best of all, we can help you put more money in your pocket to cover other living expenses.


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