Thanks to an unusual convergence of market trends, ushered in by the pandemic and followed by other disruptive events, you may see a bigger change to the cost of your home and auto insurance than usual when it comes time to renew your policies this year.
Insurance rates are based on what an insurer thinks it will cost to make you whole in the event of a loss – whether it’s roof damage during a hailstorm or a vehicle totaled during a traffic accident. As you’ve likely noticed, pretty much everything costs more than it did just a few years ago.
What’s driving higher home insurance costs
If you’ve shopped at Home Depot or Lowe’s lately, you’ve certainly seen that the price tags on building materials have gotten extremely expensive. Last year, the cost of building materials rose 4.7%, reflecting a particularly strong uptick in prices on things like asphalt shingles (16.2%), concrete blocks (18.5%) and drywall (20.4%).
To make matters worse, the home-building industry is facing a shortfall of more than 300,000 skilled laborers, which is driving up construction-related labor costs. Combined with the high cost of construction materials and historically low housing inventory, this has been making home claims much more expensive for insurance companies.
What’s driving higher auto insurance costs
Ongoing supply chain issues are driving a shortage of car parts and equipment, which were 22.3% more expensive at the end of 2023 than they were three years earlier. The overall cost of maintaining and repairing vehicles increased 18.4 % over the same timeframe – exacerbated by a growing shortage of car repair technicians.
The same issues depleted the supply of new and used cars during the COVID-19 pandemic, and inventories have not yet recovered. As a result, the average price of new cars has risen 26% since 2020, while used car prices have skyrocketed almost 40%.
Rising medical costs are another key factor. While the number of injuries and fatalities from car accidents has somewhat declined from its peak in 2021, the rising cost of medical care continues to drive higher claims costs. Between 2020 and 2023, the overall cost of medical care in the U.S. increased 10.2%.
Focus on value as you explore ways to save
Premiums have risen with every provider. Keep in mind that savings come in many forms. The value of the coverage you choose today may save you more in the long run than the lowest possible premium. At Patriot Insurance Brokers, we will do our best to get you every discount available to you.
If you have questions on your home or auto policy, give us a call or stop in today!
312 Main Street NW 49 Second Ave N suite 101
Elk River, MN 55330 Waite Park, MN 56387
Sources: National Association of Realtors, Federal Reserve Bank of St. Louis, Home Builders Institute, CoreLogic, Consumer Price Index, TechForce Foundation