Safeguard Your Legacy – Why The Cost Of Insurance Is Rising Drastically & What You Can Do About It

2021-05-12
By: MVAadmin

There is a shift occurring in the insurance industry, insurance rates are rising drastically, non-renewals are happening with more frequency, and in some extreme cases, customers are having trouble obtaining coverage. Understandably many of our clients are uncomfortable with changes occurring so we’ve prepared this comprehensive article explaining the reasons behind the shift along with some thoughts on what you can do to safeguard your legacy.

Insurance Rates Are Seeing Drastic Increases

As an insurance agent that believes in educating each client we serve, we feel it is important to share with you some of the key factors that are contributing to the drastic rate increases we are seeing. We hope the information below is both informative and helpful.

The Unprecedented Occurrence Of Natural Disasters

Hailstorms, freezing winters, tornadoes, not to mention a record number of tropical storms and hurricanes made 2020 a year filled with an unprecedented number of natural disasters. In addition to the increasingly unpredictable weather, 2020 recorded the largest number of wildfires in California’s modern history.

While the year 2020 certainly broke all kinds of records, these catastrophic natural disasters have been increasing for some time. In fact, since 1980, the US has sustained 291 weather and climate disasters where the overall cost of damages has exceeded $1 Billion. Catastrophic losses such as this affect insurance rates across the country. To find out more you can head to the NOAA website here.

The Ever-Increasing Cost Of Home Replacements

The cost to rebuild a home that has been damaged or destroyed is increasing. There are several reasons for the increasing cost of replacing a home including: the higher demand, inflation, an increase in the cost of skilled laborers, and the rising costs of building materials.

 

  • Higher Demand – When a disaster strikes in a particular part of the country or has an impact on several different housing markets, the demand for building materials and skilled laborers will obviously increase. It is simple economics that with an increase in demand, there is often a corresponding increase in the price of labor and materials.
  • Inflation – When consumers are willing to pay the increase in price for labor and materials brought on by higher demand, inflation will incur.
  • Increase In Cost Of Skilled Laborers – The homes of successful individuals often have an increase in the amount of finer details that may require the work of a skilled craftsman or specialized contracting company. A shortage of these types of skilled laborers can lengthen construction timelines which would lead to an increase in the cost of repairing a home.
  • Rising Cost Of Building Materials – Over the last 12 months, the highest driver in the rising cost of building materials is the cost of lumber. The cost of framing lumber is up 155% since 2008. One of the key factors is that many of the forests that supply lumber to the United States are located in California. When these forests were destroyed in the 2020 wildfires, it caused the cost of construction material to balloon. If you want to read more about the rising cost of lumber, this article from Bloomburg.com is a great resource.

Luxury Is Expensive

Homes are more costly to replace than years ago. The high tech appliances successful families rely on to make their life more enjoyable has also contributed to the increase. The replacement cost of household items such as Sub-Zero refrigerators, Viking cooktops, and Miele dishwashers has increased by as much as 140% over the last 20 years (according to data obtained from Consumer Reports).

Cyber Criminals Often Target Successful Families

In today’s digital age, the threat of cybercrime is higher than ever before. Cybercriminals search social media for successful families to target. Phishing schemes, malware, and social engineering are all utilized to obtain private information including Social Security numbers; dates of birth, bank account numbers, and investment information in order to steal identities rob assets.

Additional Factors

As catastrophic events continue to occur and as a result, the cost of construction continues to climb, insurance companies have to increase their rates to make up for the losses they are taking. When insurance carriers have to continue to pay out a steady increase of claims, not just for the many homes and businesses that were destroyed, but also for the enormous number of cars that were lost in fires and floods, understandably, something has to give. Another factor contributing to the increase is that when homeowners are displaced, insurance companies cover the cost of alternative living accommodations during the rebuild. When the construction process is delayed due to the inability to obtain building materials or a lack of skilled laborers, the cost incurred by the insurance companies is higher than under normal circumstances.

What You Can Do About Rate Increases

We understand that facing a sharp increase in your homeowner’s insurance may be unexpected. The desire to do all you can to save money on your insurance premiums is reasonable. We would like to offer several thoughts that can help to keep your premiums as low as possible.

Put Our Expertise To Use

Our more than 50 years of experience comes with a collection of lessons learned from the claims we’ve walked through with our clients over the years. We encourage you to put our expertise to use. If you have any questions, we encourage you to turn to us for advice. Our goal is to become a trusted resource for all your insurance needs.

We also encourage you to keep us in the loop, if you are making any home improvements. We may be able to help you identify opportunities for enhancements that may reduce your risk of claims while giving you the added bonus of credits towards your insurance policy. The more we know, the more we can help!

Stay Loyal

While it may be tempting to switch insurance carriers in order to save money on your homeowner’s insurance, it may not be in your best interest. The longer you are insured with a carrier, the fewer claims you have with a carrier, and the number of policies you have written with a single carrier are all factors that are considered when it comes to renewing a homeowner’s insurance policy. Loyalty is rewarded and in today’s uncertain insurance climate where we are seeing that in some markets it is challenging to get a new policy written in the first place, it makes sense to stay loyal to a single carrier if possible.

Limit Your Claims

Filing a claim for every downed tree and fender bender could get you dropped by your carrier and scrambling to find a new policy. Filing multiple, small claims can be a red flag for insurance companies. We have seen policies come up for renewal and be canceled because there are too many claims on file. Instead, only file claims that are more severe in order to eliminate issues when your policy comes up for renewal. Paying to repair the damage from a fallen tree out of your own pocket may leave you in a better position at renewal time.

Pay On Time

Another red flag for insurance carriers is multiple late payments. If you have not already done so, consider setting up automatic monthly EFT payments or pay for your insurance premiums annually. Not only will you have one less item on your to-do list, but you’ll also put yourself in a positive position with your insurance carrier.

Raise Your Deductible

Consider taking a look at different deductible options. The question you need to ask yourself is, How much could you pay out of pocket to repair damage to your home or property without significantly affecting your lifestyle? You can save a considerable about of money, by making a simple adjustment to your insurance deductible. When you consider the fact that you will not likely experience a loss every year, the savings in monthly premiums can add up quickly over time.

Decrease Your Risk Of Exposure

Chances are your insurance carrier will offer discounts for taking steps to prevent future claims. There are several enhancements you can make to your home that will not only reduce your risks of exposure; they will give you the opportunity to reduce the cost of your policy with discounts. While the impact of the credits may vary by state and amount, the credits you could receive for each one device ranges from between 2 to 10%.

A list of home upgrades that can help to protect your legacy include:

  • Water Shut-Off Alarm
  • Water Sensors in the laundry room, kitchens, bathrooms and utility pans such as an AC condenser and dehumidifier
  • A Central Station Fire /Security Alarm
  • Interior Fire Suppression Sprinkler Systems
  • A Whole House Generator
  • Temperature Monitor Alarm System that sends you alerts when there is an extreme temperature fluctuation

 

Final Words From Your Insurance Advocate

The bottom line of all of this is that we want to make sure your current coverage is sufficient should your home be destroyed and need to be rebuilt. Safeguarding your legacy is of the utmost importance to us at Advocate Brokerage. Our goal is to present risk management solutions that are tailored for your unique lifestyle. We are not interested in presenting coverage that you do not need, nor will we recommend coverage that would leave you vulnerable should the unimaginable occur. The coverage we recommend truly has your best interest at heart.

If you have a question or concern or are planning on making any changes to your home, please get in touch with us at 914-723-7100. We are your insurance advocate so be sure to put our expertise to work for you!

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