Why is my insurance premium going up with inflation?
It’s August of 2022 and the prices of everything are going up like the summer temps outside.
First, let’s clarify what inflation is.
“Inflation is when you pay fifteen dollars for the ten dollar haircut you used to get for five dollars when you had hair.” By: Sam Ewing
In essence, inflation is when the cost of goods sold increases, decreasing the purchasing power of your money.
But why is this making my insurance premium go up?
Insurance companies look at a variety of factors to determine your insurance premium, such as the cost to repair or replace your vehicle or home, and the industry trends such as the number of claims filed. If those costs go up, likely your premium will too.
These are the key factors that are contributing to the rise of your insurance premiums.
First and foremost the shutdowns and disruptions caused by the Covid 19 pandemic underpin almost all of our current inflation.
Higher costs of building materials and fewer construction workers.
Lumber and most all other construction material costs have gone up due to less availability, making the cost to repair or replace or build a home much more expensive. There has also been a marked shortage of skilled workers to complete the work. These factors may increase your property insurance.
The chip shortage.
A crucial component of newer cars built today is the chip. With chips hard to come by this has decreased new car availability and increased the price of a new car. It also increases the cost of a repair or replacement in the event of an accident.
Auto repair and labor costs have increased.
Due to the chip shortage, more people are keeping their cars for longer periods of time.
With more people keeping their current cars due to the chip shortage the demand for replacement parts has increased. That combined with supply chain issues the prices keep going up. Factor in the labor shortage of skilled auto techs, shops needing to pay their workers more money to stay working in the shop, the prices of repairs keep climbing… Shops also need to factor in the new Covid 19 cleaning protocols.
If you’re in an accident and need repairs on your car, these higher costs need to be considered for your insurance rate.
Market value and insurance to value.
Also, we need to factor in market value vs insurance to value. If you’re in an accident and your car is totaled we no longer can get a quote on your vehicle’s worth by looking up the value in Kelly Blue Book, we also need to consider what your vehicle is going for in today’s market.
At Dunford Insurance we are here to help you get the most affordable rates for all your insurance needs.
Now is the perfect time to have one of our agents review your policy and find ways to offset these rising premiums.
Please give us a call so we can see what types of discounts, programs, and packages we can offer you to save on your insurance.