Why Your Insurance Premiums Keep Rising—and What You Can Do About It!

Insurance costs are climbing, but not always for the reasons you think. In this episode, George Jameson, CFP®, founder of Capital Wealth Group in Columbia, SC, explains what’s driving rates higher and shares smart strategies you can use to keep more money in your pocket.

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 Welcome to "The Retirement Guide" Podcast! I'm your host George Jameson, owner of Capital Wealth Group, a Fee Only Advisory firm. Whether you’re nearing retirement or already retired, Join me each week as we explore the world of retirement planning and equip you with the knowledge and tools you need for a successful retirement.

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This is for education only.It is not tax, legal, or investment advice. Before  acting on any information consult your tax, legal, or investment advisor.

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Transcript

 Your Retirement Guide by: George Jameson, CFP®

To Your Retirement Guide podcast. I'm George, certified financial planner and founder of Capital Wealth Group in Columbia, South Carolina. And today we're talking about something that's on the minds of nearly everyone, and that is insurance premiums. You may have noticed lately, that's your home, auto, and even your umbrella insurance is costing more.

Today we're going to dive into why that is, how insurance is regulated. What's happening in the market, and most importantly, what steps you can take to protect yourself from rising costs First. First, let's start with how insurance is regulated. Unlike many other financial products, insurance is closely monitored at this state level.

Each state has a commissioner of insurance whose job it is to make sure insurance companies are financially stable. To consumers and are following state laws. Insurance companies can't just raise rates on a whim. They must submit a formal request to the State Insurance Commission. In this request, they explain which types of policies they want to increase by how much and why the commissioner doesn't just rubber stamp these requests.

They weigh the pros and cons carefully. On one hand, insurance companies need to be profitable. Why? You may ask? Well, because they need to have enough money to pay out claims. When policy holders have accidents, fires, and other losses, you don't want your insurance company to go under. Or it could put millions of policy holders at risk.

On the other hand. The commissioner also has to protect consumers from unnecessary or excessive rate hikes. Once the commissioner approves the rate increase, the new rates go into effect at the next policy cycle. So what drives these premium increases? There's several major factors to understand. One of the biggest is, of course, catastrophic events.

Think about expensive natural disasters. Wildfires in California. Hurricanes along the Gulf Coast or floods in the Midwest. Even if you live in South Carolina like I do, if your insurance carrier is national, we are paying claims for those disasters elsewhere to offset those costs. They may raise premiums across all states.

Now, if you're with a regional carrier, your rates may be less affected by events outside your region. But local disasters like Hurricane Helene that passed through Asheville, North Carolina can still impact your premiums if you live in South Carolina. Inflation is another factor. The cost of building materials has increased dramatically in recent years.

From lumber to roofing materials, plumbing supplies, you name it. All of these materials cost more today, and then labor costs have also risen. So when a claim comes in, the insurance company has to pay more to repair or replace your home, your roof, or even your car. Speaking of cars, auto insurance is also being affected by modern technology.

Today's vehicles are safer, yes, but they're more expensive to repair advanced sensors, cameras, and computer systems. Means that what used to be a simple fender repair could now cost thousands of dollars just in a fender bender. We're also seeing an increase in the number and severity of accidents, which drives claims higher.

You have distracted driving more traffic congestion. And even fatal crashes means insurers are paying more proclaim and vehicle theft is also on the rise in some areas, which adds to the cost. On top of that, medical and legal expenses associated with accidents continue to climb. All of these factors get passed along in your premium.

Insurance companies aren't just looking to raise rates. They're also adjusting coverage and underwriting standards. Some insurers are even limiting or denying coverage for homes with very old roofs. Others may decline to renew policies for clients who have made too many claims or are deemed too high risk.

It's a reminder that insurance companies are balancing risk very carefully and your individual circumstances do matter. Now that we've covered why premiums are rising, let's talk about what you can do to help control costs. Number one, please avoid small claims. This is one of the most important things you can do.

Filing claims for minor incidents, for example, under a thousand or even $2,000, can flag you as a higher risk policy holder, which can trigger rate increases, or even impact your ability to renew your policy if you have too many claims. That's what emergency funds are for, to cover those smaller fixes around your house.

If the damage caused by a covered, for example, if a small branch falls and damages your fence, if it only costs you a thousand dollars in cases like that, I strongly recommend handling it yourself rather than filing a claim. It may be inconvenient in the short term, but can save you a lot of money on premiums in the long run.

Then number two, increase your deductible. A higher deductible can lower your premium because you're agreeing to cover more of the initial loss yourself. For example, if you change your deductible from a thousand or even 2000 instead of a 500, your monthly premium could drop significantly. This is especially effective if you have a good emergency fund.

To handle the higher out of pocket cost if something does happen. And then number three, keep your insurer informed of upgrades. If you've invested in your home such as a new roof, updated HVAC system, new duct work, or other upgrades, let your insurance company know upgrades can make your home safer and more resilient.

Which may qualify you for discounts or lower risk ratings, which will ultimately lower your premium. For instance, one client of mine installed impact resistant windows after a store and that directly lower their homeowners premium. Now in the Tip four shop around, don't just assume your current insurer is your only option.

Policies vary widely and another carrier might offer better rates. Or coverage that suits your needs more effectively. And then number five, use safe driving technology. Some of you may bulk at this because they do track you, but if you're serious about lowering your rates, this is a good way to do it. If you're a safe driver, however, it could backfire on you for auto insurance.

Many carriers now offer tracking programs that monitor your driving if you are a careful driver. This can translate into meaningful discounts. You can save 10 to 30% on your premiums. So here's some key data points that driving apps track to help you determine if it makes sense for you. Number one, speed.

Obviously, the driving app will monitor how often and by how much you exceed the speed limit. And then number two, hard braking. The app will detect. All the sudden stops you make. And then number three, rapid acceleration. The app will track how many quick starts from a stop you make and then cornering.

They'll note aggressive or hard turns. Now also look at mileage measuring the total distance driven over a certain period of time, and then phone usage, detecting calls or other activities on your phone while driving. They also look at time of day, so they'll track when you drive as night driving can be considered a higher risk, and then they'll look at location using GPS to determine the routes you take, including any high risk areas like with heavy traffic or during rush hour.

So if you're a very safe and cautious driver and don't drive much, this may be ideal for you to reduce your premium. However, put a lot of amounts in your car. You often slam on your brakes, accelerate fast, and so on. The driving app may not be ideal for you. It may actually increase your premium. And then tip number six, protect your credit for your credit score greatly influences your insurance premiums.

I've seen this firsthand. Higher credit scores are associated with lower risk, which ensures reward. If your score isn't where it should be, taking steps to improve, it can reduce your premiums and it's good for your overall financial health, even if you're not planning to borrow money. And tip number seven, avoid being high risk in general.

So excessive claims, even if they're minor, unsafe properties or risky behaviors, can make you a target for rate increases or non-renewals. Being mindful of these factors and making improvements where possible can save you money. For example, keeping your roof and plumbing up to date or being cautious with small claims keeps you in a favorable risk category.

At the end of the day, a rising premiums are often a combination of national events, economic factors, and the most important part that you can control is your individual risk profile. You present to your insurer. Understanding the why gives you a lot more control over the, what you can do to manage costs.

You can't control hurricanes or wildfires or other storms, but you can control when and how you file claims, how you maintain your home, how you drive, and how you manage your finances. AKA, your credit score. Insurance is one of those areas where knowledge really can be powerful By understanding how it's regulated, why rates increase, and what you can do proactively.

You can protect yourself from unnecessary surprises and maybe even save some money along the way. That wraps up today's episode before I go. Remember, the key takeaways are avoid small claims, increase your deductible if feasible. Keep your insurance carrier informed of home improvements. Explore your options.

Get quotes. Please drive safely, not just for your safety, but for your insurance premiums and maintain a strong credit profile. Taking these steps can help you navigate rising premiums without getting called off guard. Thanks for tuning in to today's episode. I'm George Jameson, certifi financial planner, founder of Capital Wealth Group.

If you found this helpful, share it with a friend. Subscribe to the podcast, and I'll be back next week with more practical retirement and financial planning tips. Have a great day!

Learn more about Capital Wealth Group and George Jameson, CFP®, MBA, a Financial Advisor based in Columbia, SC, CLICK HERE!

George can be reached at (803) 250-6464 or george@capitalwealthgroupsc.com

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Disclaimer
The information discussed in this podcast is for general explanations and education only. It is not tax, legal, or investment advice. Before considering acting on any information heard here, first consult with your tax, legal, or investment advisor. Thank you and have a great day.