6 strategies to help mitigate rising car and home insurance costs

The cost of insuring your most expensive assets has skyrocketed. While overall inflation has slowed, insurance costs are taking a bigger bite out of many household budgets.

The average annual rate for homeowners insurance increased by nearly 20% between 2021 and 2023 — and homeowners can expect another 6% increase in 2024, according to Insurify, a virtual insurance agent. That would bring the average policy cost to $2,522 by the end of the year.

Car insurance premiums have also shot up.

The average cost of motor vehicle insurance jumped 16.5% from August 2023 to August 2024, according to the Bureau of Labor Statistics. Bankrate estimates that in September the average cost for full coverage car insurance is $2,348 a year.

Several factors contribute to climbing home insurance rates, including increasing costs for homebuilding supplies and repairs, a significant rise in litigation around claims, and the greater frequency of weather-related events, said Shannon Martin, a licensed insurance agent and writer for Bankrate.

Extreme weather events, higher replacement and repair costs, and increased medical expenses after accidents have boosted car insurance rates, experts say. 

Still, there are ways to mitigate rising premiums. Here are six strategies to consider:

About 37% of drivers say they will or have already received a quote from a new insurer in response to rising insurance rates, and 27% have or plan to switch insurance companies, according to a new survey by Autoinsurance.com.

Shop around for car and home insurance once a year to make sure the rates you’re paying now are still competitive, experts say. You might also want to compare rates if you have a life change that could affect your rate.

“If you move, get married or buy a new car, that’s also a good time to shop around,” said Maya Afilalo, an insurance analyst at Autoinsurance.com. 

Even though extreme weather events have adversely impacted many insurers, companies are at different stages with how they have adjusted.

“So a company that you may be with now that may have a much higher rate than a company that’s kind of already in a recovery stage,” said insurance agent Mike Barrett, who owns the Barrett Insurance Agency in St. Johnsbury, Vermont. “Shopping could really save you some money.” 

Compare costs by getting quotes from a few insurers before renewing your policy. You can go online or use apps for insurance marketplaces to get quotes from several companies at once. Or you may want to talk with an independent insurance agent — doing so is typically free, because they usually get a commission from the insurer for selling you a policy. You can find an agent in your area through the Independent Insurance Agents and Brokers of America. 

Lower premiums aren’t the only factor to consider. Check out AM Best and Demotech, which rate insurers’ financial strength and reliability.

“What you’re looking for is the financial strength of the carrier, which shows their ability to pay future claims, and also understanding what their history of paying claims has been in the past,” said insurance agent David Carothers, a principal at Florida Risk Partners in Valrico, Florida.

Your deductible is the amount of money you will have to pay out of pocket before the insurance company steps in. Raising your deductible can lower your car and home insurance premiums. 

With car insurance, for example, “increasing your deductible from $500 to $1,000 can reduce optional collision and coverage premium costs by 15% to 20%,” said Loretta Worters, a vice president at the Insurance Information Institute.

But if you raise your deductible, you need to have enough money in an emergency fund to cover it.

Reducing coverage on certain items, like jewelry or artwork, could also lower your homeowners premium. 

Dropping collision and/or comprehensive coverage on older cars can also cut costs. You may want to consider dropping coverage if your car’s value is worth less than 10 times the premium, according to the Insurance Information Institute. But that means you’ll have to pay for any damages out of pocket if you’re in an accident or your car sustains damage due to weather, theft or another noncollision event.

“You might be responsible for paying for those damages to other property that isn’t covered by your insurance company. So you know, there’s some risk and reward there,” said Rod Griffin, a senior director at Experian.

That said, experts say having enough insurance and the right kind of coverage may save you more money in the long run. Saving on premiums may ultimately be costly if you don’t have the type of insurance you need, such as flood insurance.

Just an inch of water can cause roughly $25,000 of damage to a property, according to the Federal Emergency Management Agency. Yet, most homeowners insurance explicitly excludes flood damage, and few people pursue that coverage. On average, about 30% of U.S. homes in the highest-risk areas for flooding have flood insurance, according to the University of Pennsylvania’s Wharton Risk Center.

Experts say you may need flood insurance even if you’re not in a high-risk zone.

“A lot of people don’t buy it because their bank doesn’t require them to and then all of a sudden, a hurricane comes. They’re not in a flood zone, according to a map, and we have a storm surge, and there’s all kinds of uncovered claims,” said Carothers of Florida Risk Partners.

Homeowners may get discounts for going claim-free for a certain period of time, or installing features that better protect their home from hazards.

Car insurance discounts range from safe driver and good student discounts to taking a defensive driving course. There are also discounts for older drivers and low mileage discounts for driving fewer miles than the average. 

Your credit history can also impact auto and home insurance rates. The higher your credit rating, the less you may pay for insurance in states where credit is a rating factor for insurance companies, experts say.

Having poor credit can significantly increase your insurance costs. For example, drivers with poor credit for full coverage insurance pay $4,349 a year compared with drivers with excellent credit who pay $2,033, according to a Bankrate report.

Also, when you’re buying a home, consider the likelihood of extreme weather for a prospective property, which can mean you have a more limited choice of insurers and face higher prices for coverage. Some websites, like First Street and Climate Check, can give you a projection of the impact of extreme weather events on your home through 2050. 

“You’re always putting yourself in a stronger position to price out your insurance before you get emotionally and financially involved,” Martin said.

— CNBC producer Stephanie Dhue contributed to this story.

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