It is no secret that the cost of living has been a hot topic the last few years. Increased cost of living has affected the entire nation – this includes housing, groceries, healthcare and the most dreaded, insurance.
What is causing this and what can you do to offset the increase?
Insurance carriers look to distribute risk by insuring in varying geographical locations – as a result, we are impacted by tragedies resulting from natural disasters across the country that may not be right down the road.
A common question that we are asked is, “Why should I be paying for the losses from hurricanes in Florida and wildfires in California?”
It may surprise you, but Minnesota and Wisconsin play a large role in weather-related claims caused by wind, hail, snow, ice and cold temperatures. Other factors impacting the insurance market are inflation in labor and materials for property and parts.
We live in a time where a snowmobile can cost up to $20K, a side by side reaching $40k, some vehicles nearing $100k. One can easily see that technological advances have increased the cost to build or fix property when accidents arise.
Because of the rising costs discussed above and increased weather-related claims in areas, insurance carriers are being very selective on what they want to insure. They are focused on making sure they are receiving adequate amounts of premium for the risk they take on. If the premium being paid is not enough to reimburse what they lose paying out on claims, they would not stay in business.
By understanding the background of the insurance market, an insured can begin to ask questions and get options from their insurance agents. Insureds have options to purchase insurance through a captive agent who represent and sell insurance products for only one insurance carrier, or they can use an independent agent who represent and sell insurance for multiple carriers.
As an independent agency in the Northland, we have been seeing these challenges first hand. Carriers have implemented strict underwriting guidelines, oftentimes making it tough to write insurance. They’re doing this to protect their profitability. Many carriers cannot afford to take in more business that in return may produce more loss than they can support. Roof age, distance from the fire department, overall condition of the property and claim history are the main drivers for finding a policy right now.
As individuals work with their insurance agents, ask questions and consider different options to offset premium increases.
Can deductibles be increased? Often times a higher deductible can offset premium and in return, help avoid turning in smaller claims. By avoiding turning in smaller claims, one increases the marketability of their insurance package with other carriers in the future.
Next time you look at your insurance, consider increasing your deductibles. Standard market deductibles right now for automobiles sit at $1,000, while property deductibles are normalizing at $2,500-$5,000, depending on the property’s value.
Ask yourself, would I really turn in a claim for $600 or would I pay out of pocket to avoid getting insurance involved anyways?
Insurance carriers want you to use insurance as a catastrophic loss plan, NOT a maintenance plan. Consider what kind of coverage is needed, meaning do you need to carry both physical damage and liability on your vehicles and recreational vehicles such as snowmobiles, ATVs/UTVs or boats?
Maybe you determine there is no sense paying for physical damage on something 10 years old. Ask your agent if you can layup coverage during times of the year that the vehicle isn’t being used – this is known as comprehensive coverage only (storage coverage for physical damage).
It’s important to understand your policy and know your coverages. Get into the habit of discussing your policies with your agent on an annual basis. This reduces the chance of an uncovered claim resulting from lack of communication.
From business insurance to personal insurance, it is important to look at both cost and coverage offered. Make sure your coverages fit what you need. No two customers are the same. Everyone has different needs. Make sure your insurance fits you like it should.
You may find yourself in a scenario where you are struggling to find an insurance carrier that will write your insurance, whether it is due to the location or unfortunate claims from the past. By working with your agent, most scenarios will get resolved by placing insurance with a carrier that has a niche for your needs and individual risk.
At Dwight Swanstrom Company, we work to build a relationship with our customers. We know that every customer has a different and unique scenario. Our company is led by experience, new ideas and young energy to assist you in navigating through the challenging and tough insurance market.
Nick Ferrell, CISR, is a Personal/Commercial Agent at Dwight Swanstrom Company.
