Home Insurance premiums continue to climb higher
How will the actions of President Donald Trump create more uncertainty with insurance rates
Ever since Donald Trump took office there’s been a lot of turmoil in Washing D.C. but how has that effect home insurance rate for you and me.
Let’s take a look
Home Insurance or insurance in general is a product whereby insurance companies take your premium dollars and invest the money. At some point and time, they will use the money to pay claims and the overhead to run the insurance business. What’s leftover, if any, would be profit for the company, shareholders or if a mutual carrier the individual policy holders.
Most carriers have been losing money in recent years due to weather related claims, which has had major impact on profitability for insurance carriers. This has been one of the biggest reasons you would see rate increases, even if you’re not in an area effected by climate related claims – first rule of insurance is spreading the risk. The more people pooling together over a large portion of the country reduces the overall risk for carriers and the re-insurance companies
The Trump effect on Home Insurance
So, how do insurance companies make money even if they are paying out $1.10 or more for every $1.00 they take in? Investing – yes, every time they take a premium dollar for your home insurance, auto insurance or any kind of insurance they invest the money. When the stock market is doing well, as of today it’s up 15% since the election, insurance companies tend to get more aggressive with rates. By lowering premiums, they can write or sell more insurance which in turn those premiums are invested. The reverse is often seen during times or downturn in the market with rate or premiums tightening or as they say in the industry, harden. Raising premiums to offset the opportunity to invest in the market, especially if unable to lower loss ratios.
Trump in conflict with our neighbors to the north impacting Home Insurance rates
Recently you’ve probably read or heard about the trade imbalance between Canada and the US regarding lumber and milk. You might be asking what does milk and lumber have to do with my home insurance premiums? Apparently, there’s a $400 million-dollar trade imbalance with the US and President Trump is looking at slapping embargos on imported goods from Canada, including lumber. Obviously, lumber is used to build homes and the fact the Trump administration is proposing a 20% tariff on lumber coming from Canada could and would have large impact by the construction industry, and ultimately by home insurance buyers.
What can we do if home insurance rates go up?
The best advice we can offer anyone is shop… It’s higher unlikely your current policy is going to be reduced since insurance companies already have your business. Mostly likely if they are to lower rates it’s going to be for new customers, assume a booming economy. If you’re with a captive agent, only selling one carrier, they are not going to be that motivated since you are have the only home insurance policy they currently sell. The Best option is going to be an Insurance Broker, like Insurance Brokers Group. There you’ll be able to get multiple Home Insurance quotes saving you time, money and energy.
Conclusion – on one hand we are seeing a very robust and growing economy with a stock market that continues to grow. Most individual and business want to participate in the grow opportunity by being invested in the market. This helps the insurance industry get a better rate of return on the premiums collect for their investors and policy holders. But, at the same time potential tariffs on imports pose the opposite effect, raising the cost of goods, which in turn make the cost to re-build homes more expensive.
Since we doubt our ability to predict future weather rated home insurance claims, we’ll just half to watch how Trump administration resolves the trade imbalance and hope the economy and the markets continue to grow.
For more information or to receive insurance quotes, call 314-569-1010 or click here for online home insurance quotes.
Insurance Brokers Group is an online insurance brokerage helping people shop, compare and buying insurance from “A” rated carriers at the most affordable rates.