By: Ashley Ann Reich
In our current economic climate, where prices continue to rise, Americans are asking themselves what to trim from their monthly budget. A large, standout expense often is the cost of insurance. We pay for many types – health, car, home, pet, life, etc. Is the cost worth the benefit or the off chance we use it throughout the month? For some households, insurance use is a common occurrence, especially in situations where there are ongoing health issues. Recently, Floridians have been exhausting their hurricane insurance due to the back-to-back catastrophic hurricanes across the state – the same is true for wildfire-stricken California. Whether you use your insurance frequently or not, it can provide a buffer between an expense that could deplete your savings or put you into long-term debt.
Economic Impact
According to NPR, car insurance rates have risen more than 20% in the last year and home insurance premiums have increased in the double digits. With prices continuing to rise due to the number of claims, expenses of those claims, and inflation playing a significant role, it is hard to determine what is worth the price hike. According to U.S. News and World Report, it is reported that there has been a significant increase in dangerous driving violations such as major speeding incidents, DUI violations, and distracted driving violations (e.g., cell phone usage at the wheel) – all since 2019. Additionally, vehicles that need repairs due to an accident are seeing wait times increase, but more notably, the cost of those repairs. During COVID, dealers and repair shops saw crippling impacts on the supply chain and a deficit in the labor industry for auto mechanics and repair technicians. Another interesting note is that, over time, we have seen vehicles become increasingly technology-savvy, which has its downside due to the skilled labor needed and the cost of the parts.
On the home insurance front, homeowners are seeing increases in premiums for a variety of reasons. Obviously, there are states where the insurance rates are going to be higher due to these states being more prone to natural disasters based on historical impacts.
Take Action
For many Americans, insurance is one of their largest monthly expenses, and some are considering whether it is worth the added cost. According to George Kamel from Ramsey Solutions, “Insurance comes down to one word: risk.” You want to be protected from the risk of a natural disaster or a catastrophic accident could have on your finances. The concept of insurance can be overwhelming, but there are a few valuable tips to find quality insurance for an affordable rate.
1. Shop Providers:
Most people remain with their initial insurance provider and do not think to consider switching to save some extra money; however, there are many insurance companies that are providing lower rates, better discounts, and quality coverage. This does take time to shop around, but I highly recommend seeking an insurance broker who can act as a third party to provide the best quality service and rates. Many of these brokers have direct experience working with various insurance providers. They can provide honest feedback on the best in the industry.
2. Narrow Down Types of Insurance:
Consider your stage of life and the multiple forms of insurance you may need for your lifestyle and family situation. Dave Ramsey lists eight forms of insurance that you need, which include auto, health, life, homeowners/renters, long-term disability, long-term care, identity theft, an umbrella policy., Not everyone needs these forms of insurance right away, but they are considerations as you age and your family grows. Without a doubt, start with health, home/renters, and auto insurance, and many companies will give you a lower rate if you bundle certain types of insurance together.
3. Budget Your Deductible:
insurance does come at a cost – likely monthly – and extends to paying a deductible in most cases. You will pay a rate for your insurance throughout the year, and then you will also have to fork over a deductible that can vary based on your insurance type. Make sure to discuss these deductibles with your insurance provider so that you can add that amount in savings or budget for that deductible annually. Another tip – if your company or provider offers a higher deductible plan, that will often save you on your monthly cost and annual premiums, but that will mean that you will need to budget extra for this expense.
Regardless of where you find yourself on the insurance spectrum, it pays to shop around and gain knowledge of how the industry works. For me, it has quite literally paid me to switch insurance companies almost annually to get a better deal and greater coverage, especially on my home. From personal experience, it has been well worth establishing myself with an insurance broker locally that can shop around (proactively) for new companies and alert me when it is time to consider shopping around for better rates. In an economy where everything seems to continue to go up in price, now is the time to see if you can find some margin in your budget while maintaining the best quality coverage.
ABOUT THE AUTHOR
Ashley Ann Reich has been with Liberty University since 2007, first working in Student Financial Services and then as Executive Director of Government Affairs before transitioning to her current role as Senior Vice President of University Compliance. During her time at LU, Ashley started the first financial literacy program, reaching thousands of students in budgeting, paying down debt, and planning for the future.
