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How Inflation is Affecting Your Insurance and Your Budget

It is true – inflation is affecting your insurance rates too. Absolutely another pain point to our monthly budgets. Price is certainly a big issue, but it is also really important to understand how inflation is affecting your coverage levels to ensure that your current policies still make sense for your needs.


For auto insurance, the cost of repairs, car rentals and vehicle replacement prices are all on the rise. Drivers are also back on the road and within 1% of pre-pandemic driving levels. The lack of “being on the road” for almost two years seems to have also affected driving habits. Vehicle fatalities are up 12% and impaired driving, speeding and seatbelt violations are all on the rise. These factors mean more crashes, while the cost of vehicle repairs, part delays and healthcare costs continue to increase. A very unfortunate perfect storm causing the cost of auto rates to go up. If you have not seen your auto insurance price increase yet, it is likely coming. You need to expect and prepare for it. It is industrywide and we are seeing it across the board with many insurance carriers.


    • Supply chain issues are rapidly depleting inventories of new and used cars. Inventories have reached a critical low point, falling 87% between 2020 and 2022. The average price of new cars has risen 14% over the same period, while used car prices have skyrocketed to 55%.


For homeowners’ insurance, building material costs are at what seems to be an all-time high. The cost of materials, coupled with a lack of labor and tradesmen, is a costly combo. At the same time, we are coming off a combined two years of the highest natural disaster losses in U.S. history, accounting for $176 billion in 2020 and 2021 and residential construction materials are up almost 19% since December 2020.


    • The home-building industry is currently facing a shortfall of at least 200,000 skilled trade workers. About 60% of surveyed builders report a skilled labor shortage.


    •  Lumber has played an outsized role in the inflationary trend of building materials, more than tripling in price since March 2020.


What does this mean for your personal insurance policies? My recommendation is to pull your insurance declaration pages right now. Look at how much DWELLING coverage you have on your home. Do you think you would have enough money to rebuild if your home were completely destroyed in a fire?   Check your PERSONAL PROPERTY coverage. Would you have enough money to replace all your belongings? If not, you need to call your agent and talk it through.

Next, look at the coverage limits on your auto policy. If you were in an accident with three vehicles and the police report deemed the accident to be your fault, would you have enough BODILY INJURY coverage to pay the medical expenses of all the passengers in all the vehicles if all were injured? Would you have enough PROPERTY DAMAGE coverage to replace three vehicles? If you are questioning it, call your agent.

We are here to help. If you have questions, never hesitate to reach out!

Tommy Allmon, President


Sources:  Home Builders Institute, National Association of Home Builders, US Department of Commerce, US Department of Transportation, Federal Reserve Bank of St. Louis, Consumer Price Index, National Safety Council, New York Times, National Highway and Safeco Administration, American Property & Casualty Insurance Association, Insurance Journal, Safeco Insurance