Rising prices for auto and home insurance are weighing on cash-strapped Americans.
In 2022, the average price of both types of insurance increased by the most in more than five years.
And interest rates are expected to rise even more significantly this year, according to an analysis by S&P Global Market Intelligence. Within his first 7 months, both already he recorded double-digit increases.
Rising insurance premiums are driven by a variety of factors, including extreme weather and an increase in costly car crashes. Insurers face rising costs of resolving claims, due in part to inflation.
U.S. auto insurers are rapidly raising premiums to compensate for historically poor performance, according to S&P Global data.
Rising insurance premiums are caused by a variety of factors, including more frequent severe weather and costly car accidents.Pictured is a flooded house in Florida in November.
According to Forbes Advisor’s latest analysis, the average cost of home insurance is: $1,582 per year For a policy with $350,000 in coverage.And the common driver pays $2,150 per year for full coverage car insurance.
That means households can expect to spend more than $3,700 a year on car and home insurance alone.
These costs are so high that some people try to save as much as possible by purchasing home insurance with a high deductible or choosing not to purchase insurance at all.
Adam Katz, 40, of New Jersey, a personal finance author and founder of Money for Dads, says his car insurance has almost doubled in just three years, DailyMail.com told.
The most recent increase in insurance premiums took place in April, when insurance company Geico announced it would increase the monthly premium payments for his two cars from about $230 to $270.
Adam Katz, 40, is a personal finance author and founder of Money for Dads.His Geico auto insurance has nearly doubled in his three years
In just over a year, his fees have increased by 23%. This is about the same as the change in Geico’s national average rate. Data from S&P.
“I called them and said, ‘We don’t use much insurance.'” We don’t drive much. Why increase? ” he said. “They said our costs have increased, so we have to pass that on to you.”
Katz noted that the increased costs were manageable, but such a drastic change in monthly spending could be significant.
“For people who say they’re making $30 an hour or $50 an hour or whatever, it’s a problem if they’re working an hourly wage and making minimum wage,” he says.
The hike he experienced was not unusual.according to Data from S&P, the average cost of insurance increased by 11 percent last year. His first seven months of 2023 alone have already increased by the same amount.
Texas saw the highest cumulative rate increase of 37.6% over the previous 20 months. Illinois, Ohio, Tennessee, Nevada, Arizona, Illinois and Utah also saw rate hikes of more than 30%.
The frequency and severity of accidents is increasing, said Lynn McChristian, director of the Risk Management and Insurance Laboratory at the University of Illinois at Urbana-Champaign.
“The number of accidents has skyrocketed,” she told DailyMail.com. She said: “Deaths and accidents are rising, and data shows people are driving more recklessly.”
Homeowner’s insurance premiums rose 6.1% last year. And interest rates had already risen 8.8% in the first nine months of this year (through September 1), according to S&P data.
Within its first six months, Geico had already raised the national average interest rate by almost 8 percentage points, according to S&P data.
Similarly, Charles Nice, associate professor of risk management and insurance, The Florida State University College of Business told DailyMail.com that bad weather and an increase in fraud are driving up the cost of home insurance.
“In Florida, we had a very big hurricane impact, and number one, number two, we also had fraud issues in the marketplace. So insurance companies were losing a lot of money,” Nice said. Ta.
Separate homeowners insurance data released by S&P shows that premiums rose 6.1% last year. And interest rates had already risen 8.8% in the first nine months of this year, ending Sept. 1.
Arizona had the highest rate of increase in the U.S., with insurers raising prices by an average of 18.4% overall. Texas’ 16.4% increase was her second largest, followed by Illinois’ 16.3%.
Twelve other states also saw double-digit increases. According to Nice, these increased costs are a significant burden for most households.
“A US survey shows that 50% of households cannot survive an unexpected loss of $500. They don’t have a rainy day fund to cover it,” he said.