If you own a home or a vehicle, you already know the painful truth: Insurance premiums have been skyrocketing. We have received so many complaints at our Consumer Action Center about the massive run-ups in both homeowners and auto insurance.
Fortunately, I have some good news on the auto insurance front: The big, rapid run-ups in premium costs are finally over. The bad news, of course, is that we are stuck with the high costs that already hit us.
Let’s deal with how you can fight back against these rising costs, one by one.
Homeowners Insurance: They Are Watching You
Homeowners insurance has completely transformed into individual risk management, rather than community-wide insurance.
What’s the difference? In the past, insurers set rates based on a general community or ZIP code. Not anymore. Today, they are slicing and dicing data down to you as an individual and your specific house. That is why we are seeing this bizarre behavior in which insurers use satellites, artificial intelligence, and drone technology to continually check on your home.
Their goal? To minimize payouts when a claim comes, or simply to deny claims altogether.
A report in The Wall Street Journal found that after paying all this money for homeowners insurance, you have about a 50-50 shot that the company will actually pay out when you file a claim. It is almost a coin toss. It is deeply frustrating to think you pay all that money just to face a coin flip when you need help.
You have to understand that the insurance business is a cold, hard, mean-spirited business now. They don’t care about your property, your life, or your pets. They are not your partner; they are your adversary. But sometimes, they can be your frenemy. When you reduce the risk to them, they, in turn, should reduce the cost to you.
Here are a few ways to actively reduce that risk and lower your premiums:
1. Install Water Leak Detection Systems
Water claims are a massive hit to the profitability of insurance companies, so they love it when you mitigate that risk. If you notify your insurer that you’ve installed a system, it can lead to significantly lower premiums.
- Active systems: These sense a leak from any water source in your dwelling and automatically shut off the water main. We have one of these at our place. They are highly effective but harder to retrofit into an older home; they are best installed during construction.
- Passive systems: These are now very cheap consumer items. They connect to an app on your phone and notify you the second a leak is detected, so you can shut the water off manually. We recently had a slow toilet leak that kept triggering our app. Because of the notification, we fixed it immediately with zero property damage.
2. Add Fire and Security Protections
Many insurers will now provide you with devices to detect potential electrical fires in your home. Depending on the company, they will either give you the system for free or offer a multi-year discount if you buy it yourself. Additionally, having a burglar alarm system that includes smoke and fire monitoring will get you a discount with almost any insurer because fire is a much greater risk to them than theft.
3. Raise Your Deductibles
If you have been a long-time listener, viewer, or reader, you know my obsession with holding higher deductibles. Setting your deductible as high as the sky causes a huge reduction in your premiums and eliminates the temptation to file small claims that could get you dropped.
If you have a mortgage on your home or a loan on your car, your lender will limit how high your deductible can go. Check their limits and raise your deductible to the maximum allowed. I am fortunate not to have a mortgage, so I opt for catastrophic-only coverage, and the premium savings are quite nice.
Auto Insurance: Drive Less, Pay Less
While the worst of the auto insurance hikes are behind us, premiums are still incredibly high. If you want to drop your rates without sacrificing coverage, try these strategies:
1. Update Your Mileage
There is still much more hybrid work than I thought there would be, which means you may be driving fewer miles than your insurance company is charging you for.
If you are an ultra-low-mileage driver, you should absolutely get a quote on a pay-per-mile insurance product.
If you still drive a moderate amount but less than you used to, log into your insurer’s app or website and reduce your reported annual mileage. It will have a direct, positive impact on your premium.
2. Take a Defensive Driving Course
In many states, if you complete a certified defensive driving course — usually a six-hour online class — you will receive a state-mandated reduction of 10% to 15% on your auto insurance premiums. Your insurer cannot refuse it; by law, they must provide it to you.
The catch? In most states, you won’t qualify for this mandated discount if you’ve had an at-fault accident or a moving violation within the last three to five years. But if your record is clean, it is an easy way to save.
Final Thoughts
You don’t just have to sit back and accept these massive premium increases. Beyond shopping your insurance around with other providers, becoming an active participant in reducing your own risk is the best way to force these companies to lower your costs.
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