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  • Eric Walter, MBA, CFP®

Financial Planning Corner: What Can You Do About Your Insurance?

Inflation over the last few years has had a significant impact on those whose income has not risen in unison. Over the past year, however, the three key measures of inflation – the Consumer Price Index (CPI), the Personal Consumption Expenditures Price Index (PCE), and the Producer Price Index (PPI) – have significantly cooled. Items such as groceries, gasoline, and clothing have only risen slightly over the last 12 months, approximately 1% and far less than average earnings, and items such as vehicles, furniture, appliances, electronics, toys, hotel rooms, airfare, and rental cars have seen price reductions. While that is all positive news, housing, rental costs, and property & casualty insurance remain areas of concern.

We have had many client conversations this year about the significant increase in their property & casualty insurance premiums. The largest price increase has been in auto insurance, by a mile. According to the Bureau of Labor Statistics (BLS), auto insurance increased by over 20% from May 2023 to May 2024. Tenants’ and household insurance has also increased by around 4% over the same period. While it may be tempting to reduce premiums by decreasing or dropping coverages, it is important to maintain adequate limits. There are many avenues to explore that may offer some premium relief. Below are some ways to potentially save on your annual premiums:

  • Price shop - Human nature sometimes leads us to continue with the same insurance company for years without reviewing the details of our policies. This is to our disadvantage. Many insurance companies offer discounts to new policyholders or provide additional discounts after an introductory period. Rate differences between companies may also shift over time. It is good to explore annually, but especially whenever you receive a large premium increase. Whenever you do shop, make sure you are comparing equivalent coverages.

  • Bundle policies - Many insurance companies offer discounts if you have multiple policies (home, auto, umbrella, and/or personal articles) all through the same company.

  • Increase deductibles - Depending on your specific circumstances and if you can cover the increased amount in the event of a claim, increasing your deductible may provide a good way to save. 

  • Update payment frequency - If your cash flow allows for it, some companies offer a big break between annual, bi-annual, and monthly payments.

  • Maintain or improve your credit - Some insurers consider your credit score in their premium calculations which means the better your score, the lower your payment may be. Credit scores are based on a mix of payment history, amounts owed, length of history, recent credit inquiries, and mix of credit.

  • Review discounts - Ensure you are receiving all discounts for which you may qualify. In addition to bundling, insurers may offer discounts for being a long-time customer, organizational memberships, a clean claims history, or security/safety measures.

  • Review coverages - See if there are any coverages you may not need or may be able to reduce. Again, it is important to maintain adequate coverage but needs may change over time as your circumstances change.

While premium costs have been top-of-mind with good reason, the significant asset appreciation and higher input prices over the last few years make it extremely important to ensure you have maintained the right levels of insurance coverage. We are happy to review and discuss any insurance policy or premium questions you may have or analyze your exposure as part of your overall Financial Plan.

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