How to Keep Your Insurance Rates Reasonable Without Putting Yourself at Risk.

In last month’s article, I laid out several key reasons why Auto and Home Insurance rates have skyrocketed over the past three years. Today, we will discuss several steps you can take to potentially reduce your rates, followed by strategies to keep your insurance rates low in the long term.

First things first- let’s talk saving money. For this, I would suggest two primary strategies: do a thorough review of your current policies, and then shop around with other insurance companies. You can do one or both of these, but start with the policy review first so you know what you have before you shop around. If you like your current agent and can find some savings within your policies, you can spare yourself the hassle of shopping.

A policy review works far better when you have a knowledgeable agent to do the review with you, but if you don’t, you can ask yourself the following questions. Just be prepared for some extra research.

Key questions for a policy review

1. Do I understand the purpose of each coverage, the different levels available, and how they apply to my protection? For example, if I have Collision coverage on my vehicle with a $500 deductible, in what scenarios would Collision apply? If I raised or lowered my deductible, how would that affect my premium? If I chose to go without Collision coverage to save money, what would this mean if I got into an accident? Take your time and go through each coverage like this. Take notes, do a cost/benefit analysis on each potential coverage change that you think you may want to make and then adjust your policies as you see fit. A good agent will have seen hundreds, if not thousands, of claims in their day, so they can give perspective and real-life examples to go with each coverage.
2. Are there any discounts that I am missing? There are quite a few potential discounts available for each policy, but the biggest bang for your buck is typically bundling your Auto and Home Insurance with the same carrier. I would say about 85% of the time, this saves you money overall. After that, low mileage discounts, alarm system discounts, and driving apps that allow an insurance company to adjust your rate based on how you drive will have the biggest savings potential.
3. What would the savings be if I increased my deductible? This one is fairly straightforward- Would the savings incurred by increasing my deductibles be worth the risk of having to cover that deductible in the event of a loss? 10-15 years ago, I would have said that the difference between a $ 1,000 and a $ 5,000 deductible on your home insurance was so minimal as to not be worth it. Today, that is often no longer the case.
4. Is the dwelling coverage on my home insurance policy accurate? Home insurance companies typically increase the coverage on your home by around 4% a year to keep up with inflation. However, over the past few years, they have ratcheted that up to 10% or more per year. If you’ve been with an insurance company for more than 3-4 years, this can result in your home being significantly overinsured. To find out, simply ask your agent or insurance carrier to run a current replacement cost estimate for your home. If it is significantly overinsured, you can request that they reduce the coverage appropriately, which can save you a nice bit of money. Be aware, though, that the new replacement cost estimator could actually come back higher than your current coverage, too.

Strategies for shopping insurance

In Washington, there are only 20-25 insurance companies that offer home and auto insurance policies for preferred clients. Independent insurance agents like myself typically represent 8-10 of these companies, while the remainder are either sold through agents who represent only one company (think State Farm, Farmers, American Family, etc.) or direct-to-consumer companies (think Geico and USAA) that do not use agents.

It makes sense then to get quotes through an independent agent and one or two captive or direct companies as well. That will allow you to easily poll about half the field and give you a good idea of what the going rate is. You do need to be careful that you are comparing apples to apples, which is why it’s good to start with a thorough review of your current policies.

4 ways to keep the best rates possible for years to come.

Now that you have the best rates and coverage that you can find, what strategies can you employ to keep those good rates?

1. Don’t file small claims. Filing a claim will almost always have a negative consequence on your insurance rates, and filing more than one in a 3-year period will likely result in an exponential increase and/or a non-renewal letter. The best way to avoid this is to follow this rule of thumb: if it is something I can pay for out of my own pocket without putting myself into financial hardship, then I should refrain from filing a claim. There are exceptions to this rule, of course, and you can discuss those with your agent as potential claims scenarios arise.
2. Drive defensively. Not only will this help you avoid accidents and speeding tickets, but it will prepare you for a new style of insurance underwriting that is likely just around the corner. You’ve likely noticed that companies are starting to advertise significant discounts for trying their app or device that tracks how you drive. Right now, this is optional, but I would suspect that in the future it will just become a normal part of the underwriting equation. Newer vehicles already track this data, so insurance companies won’t even need to have you download an app.
3. Adopt “smart home” technology and maintain your home. Insurance companies inspect properties periodically because a well-maintained home is statistically much less likely to suffer a loss than a home in disrepair. New Smart Home technology now allows you to monitor your home, not just for burglars and fire, but for water leaks, electrical problems, and more. Expect insurance companies to offer significant discounts for these in the future.
4. Maintain a good credit score. Credit history remains one of the largest rating factors that insurance companies use and I don’t see that changing anytime soon. There is a strong correlation between credit and claims frequency.

Hopefully, this information has been helpful and will lead you to find and keep great insurance policies at an affordable rate. Please feel free to reach out with questions, and I or my amazing team will be happy to help!

Ryan Stueber

Ryan@pnwinsurancegroup.com

253-527-6261