How to keep your home and auto insurance

“Sheer panic” is what Teddy Mars from Louisiana experienced when his homeowners insurance provider decided not to renew his policy in early 2023. The only remaining option left him and his family with a higher homeowners insurance cost than their mortgage payment. To cover these increased costs, Mars had to dip into his savings, withdrawing $12,000 from his individual retirement account. Mars pointed out, “We’re not sitting on a huge mountain of cash here,” highlighting the financial strain this situation created. Moreover, for homeowners with mortgages, opting out of insurance is not a feasible option.

Mars reluctantly contemplated leaving his beloved home state of Louisiana, primarily due to the rising insurance costs. However, the decision wasn’t straightforward, especially with a high school-aged son and concerns about the saleability of their home. Mars wondered, “Who wants to buy a house in our area when they can’t insure it?”

Regrettably, Mars’ story is becoming all too common among Americans as climate-related disasters increase in frequency and severity. Coupled with inflation and a surge in auto accidents and thefts, many people are grappling with the growing unaffordability of home and car insurance.

Homeowners are increasingly caught in a difficult situation. A recent survey conducted by NerdWallet revealed that approximately three out of five individuals with homeowners insurance reported a rise in their premiums over the past year. Additionally, around one in ten homeowners are concerned that their insurer might cease operations in their state. This fear is justified, as exemplified in Florida, where private homeowners insurance has become so scarce that Citizens, the state-funded “insurer of last resort,” has become the top property insurer based on the number of policies.

Worryingly, some homeowners are opting to forego insurance altogether. A 2023 survey by the Insurance Information Institute found that 12% of homeowners lack homeowners insurance, with roughly half of these homeowners having a household annual income of less than $40,000. This situation has led to what Dori Einhorn, the owner of California-based Einhorn Insurance, describes as a “bloodbath,” particularly as more insurers are no longer underwriting policies in states like California. Einhorn adds, “As long as global warming persists, I don’t see how this is going to stop.”

It’s not just homeowners insurance that’s proving challenging to secure. Car insurance companies are tightening their underwriting criteria while raising premiums, as illustrated by Gail Harlan’s experience in Florida. After leasing a 2023 Kia Seltos, Harlan was shocked to discover that her new policy was significantly more expensive than her previous vehicle’s coverage. This situation was exacerbated by the fact that Harlan couldn’t enroll in the same pay-per-mile car insurance program she previously used for her 2022 Honda CR-V. Shopping around for quotes yielded unexpectedly high prices, with the highest quote exceeding $2,200 for a six-month policy. Some insurers even refused to provide a quote, citing an increase in thefts of Kia and Hyundai vehicles. Despite providing evidence that her 2023 Kia Seltos was not at risk for these thefts, Harlan was met with obstacles. 

Unfortunately, Harlan’s experience is not an isolated case. According to the NerdWallet insurance survey, more than one in six car insurance policyholders reported substantial premium increases in the past year. Car insurance costs rose by 19% in August compared to the previous year, as per the latest data from the U.S. Bureau of Labor Statistics. This increasing cost, coupled with other factors, has prompted a growing number of Americans to consider forgoing car insurance altogether.

The insurance industry’s risk pool, where premiums from policyholders are collected, is experiencing a significant drain. This has compelled many insurance companies to either increase rates or cease covering certain areas. Several factors contribute to this situation:

1. Increased claim costs due to extreme weather events and traffic fatalities.

2. Escalating reinsurance costs, impacting insurers’ ability to underwrite high-risk markets.

3. Disputes between insurers and state legislatures, such as limitations on rate hikes.

While there is hope for potential solutions, such as U.S. Senate hearings on the property insurance market and measures to address inflation and insurance reforms, many Americans are currently struggling to make ends meet. A 2023 survey by LendingClub found that three out of five Americans live paycheck to paycheck.

If you find yourself grappling with the rising cost of insurance premiums or are concerned about your insurer’s intentions at renewal, here are six actions you can consider:

1. Shop around: Compare quotes from different insurance companies to ensure you’re getting the best deal.

2. Seek help: Enlist the assistance of an independent insurance agent who is familiar with your area and can identify companies still offering policies.

3. Adjust your coverage: Consider raising deductibles or dropping optional coverages to lower insurance costs, while ensuring you maintain sufficient coverage.

4. Get ahead of the problem: Take proactive measures to safeguard your property and maintain eligibility for coverage, including home inspections for older homes in high-risk areas.

5. Research before you buy: Obtain insurance quotes before purchasing a new home or car to avoid unforeseen high premiums.

6. Don’t let your insurance lapse: Even in the face of high premiums, maintain continuous coverage to avoid financial risk and higher premiums in the future. Insurance is typically required for vehicles and mortgaged properties.

To keep your home and auto insurance in good standing, you need to follow several key steps:

1. Pay Your Premiums on Time:

   – Always pay your insurance premiums on time. Most insurance providers offer various payment options, such as monthly, quarterly, or annually. Choose the payment frequency that works best for you, and make sure you budget for these expenses.

2. Maintain Good Credit:

   – Many insurance companies use credit scores to determine insurance premiums. Maintaining a good credit score can help you secure lower insurance rates. Pay your bills on time, reduce debt, and monitor your credit report for accuracy.

3. Communicate Changes:

   – Inform your insurance company of any significant changes in your life, such as moving to a new address, getting a new vehicle, or making home improvements. Accurate information helps ensure you have the right coverage.

4. Review and Update Your Policies:

   – Periodically review your insurance policies to ensure they still meet your needs. You may need to adjust coverage levels, add new coverage, or remove coverage if it’s no longer necessary.

5. Bundle Policies:

   – Many insurance companies offer discounts for bundling home and auto insurance policies. Consider bundling your policies with one provider to save money.

6. Shop Around:

   – Insurance rates can change over time, so it’s a good idea to compare quotes from different insurance companies periodically. You may find a better deal elsewhere.

7. Drive Safely:

   – Safe driving can help you maintain lower auto insurance premiums. Avoid accidents, traffic violations, and claims that could raise your rates. Some insurers offer safe driver discounts.

8. Home Maintenance:

   – Keep your home in good condition to prevent claims related to damage or accidents. Regular maintenance can help you avoid issues that could lead to a rate increase.

9. Choose Appropriate Deductibles:

   – Consider the deductible amount on your policies. Higher deductibles can lead to lower premiums, but make sure you can comfortably cover the deductible in case of a claim.

10. Understand Your Policy:

    – Familiarize yourself with the terms and conditions of your insurance policies. Knowing what is covered and what is not can help you avoid misunderstandings and disputes with your insurer.

11. Report Claims Promptly:

    – If you need to file a claim, do so promptly and accurately. Provide all necessary information and documentation to expedite the process.

12. Seek Discounts:

    – Many insurers offer discounts for various reasons, such as having security systems in your home, using anti-theft devices in your car, or being a good student (for younger drivers). Inquire about available discounts with your insurance company.

13. Consider an Umbrella Policy:

    – An umbrella policy can provide additional liability coverage that goes beyond your home and auto policies. It can offer extra protection at a relatively low cost.

By following these steps and staying proactive, you can maintain your home and auto insurance coverage effectively and potentially save on premiums over time. It’s also a good practice to regularly review your policies and consult with your insurance agent or provider to ensure your coverage continues to meet your needs.