When I started in insurance, as my kids say, in the 1900’s, The average home was insured for $98,000, the average deductible was $500 and the average cost for coverage was $550 per year. A roof cost on average $3200, a new home could be bought for an average of $89,000. We are a long way from those numbers today. However, the biggest difference is in 1997 Insurance companies in Missouri paid out $269,012,695 in claims in 2022 the industry, just in Missouri, paid $1,121,497,078 in claims. Home insurance claims in Missouri have jumped 416%! Where premiums, deductible and cost are up 300% in 25 years.
In 1997 insurance carriers were making profits of 2-5%, today, only 1 insurance company in Missouri has made a profit and that is Progressive. (We are a platinum Progressive agency ) The rest have lost money, some as much as 20 to 30 cents for every dollar brought in.
The next significant change we are going to witness is a very fast change to “Percentage Deductible” Instead of having a $1000 or $1500 we will see deductibles of 1% or 2%. The good news is a 1% deductible for wind and hail will save someone like my parents $200 on their insurance premium. The bad news is knowing what 1% deductible actually is.
When you take a percentage deductible it is 1% or 2% of coverage A, the amount the insurance company thinks it will cost to clean your house up after a loss then build you a new one. So, if your home is average with coverage of 270,000 a 1% deductible is $2,700 and a 2% deductible is $5,400.
Let’s assume we have a windstorm…again…. And your roof is politely removed by mother nature. The average cost of a roof is now about 12,000 so you will be responsible for 2700 at a 1% deductible and the insurance company will pay $9,300.
There is nothing wrong with Percentage deductibles as long as you understand them, and might I suggest we pull a page from Dave Ramsey and prepare for them with an emergency fund.
We predict by the end of 2024 1% wind and hail deductibles will be the standard.
I am going to pivot and end this BLOG with the fastest ways to save money on your insurance:
- Raise your deductible (I hope you all saw that one coming)
- Bundle your autos and home together.
- Attempt to stay with a carrier at least 3 years (carriers are giving deep discounts for loyalty)
- Do home maintenance as needed, prevention is key.
- Take care of the small stuff. A claim paid at $1,000 will cost you more than you will receive.
- Shop auto rates on cars before you buy a car. A great deal on a 2018 Hyundai or Kia could double your insurance cost. Call us before you buy that car.
- Use Millennium Brokers Group