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May 27, 2024
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Factors That Cause Personal Lines Insurance Premiums to Increase

It’s no secret that insurance premiums for personal lines—such as home and auto insurance—are on the rise. Even if you haven’t filed any claims, you’ve likely noticed the upward rate trend. But why is this happening?

Why Insurance Rates Go Up

The following are factors that may be influencing personal lines premiums:

  • Economic inflation—Inflation can affect everything, including policy  rates. While the overall inflation rate has fluctuated over time, policy  rates can’t adjust in real time. Typically, rate-change filings with state policy departments occur annually. As a result, insurance premiums may lag behind actual inflation rates.
  • Social inflation—Social inflation refers to the rise in claims costs that exceed economic inflation. One factor is increased litigation. More lawsuits are being filed, leading to higher legal costs for insurers. Another contributing factor is escalating settlement costs. Some court decisions result in massive settlements, which can significantly impact insurers’ expenses and are ultimately borne by policyholders through higher premiums.
  • Weather-related losses—Changing weather patterns have led to more frequent and severe weather events. Insurers face mounting losses due to tornadoes, hailstorms and other catastrophic weather events. As expenses rise to cover these claims, insurers must increase premiums.
  • Reinsurance costs—Reinsurance is insurance for policy companies. When primary insurers face significant losses, they turn to reinsurers to help cover them. However, inflation and severe weather have driven up reinsurance costs. Like primary insurers, reinsurers have also pulled back in select markets, leaving carriers with limited options for their own policy coverage. This can affect the availability and affordability of policy in an area.

Ways to Save on Personal Lines Insurance

The following factors may help save on personal lines policy premiums:

  • Compare quotes. Insurers price their policies differently, so it’s essential to compare car and home policy quotes from multiple companies. Make sure you compare identical policy coverage and limits to get an accurate comparison.
  • Bundle policies. Consider bundling multiple types of policy(such as home and auto policy) with the same company.
  • Look for discounts. Insurance companies often offer various discounts that can lower your premium. Ask your agent about potential discounts available to you.

Personal Lines Insurance in Phoenix and Yuma, AZ

As various factors continue to shape the policy landscape, policyholders can expect premiums to remain elevated. However, understanding these dynamics can help individuals make informed decisions about their policy coverage. Contact Best Buy Insurance today to discuss ways you can save on your insurance policies.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your policy professional for further information.

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