How to reduce the impact of rising car and home insurance rates

Rising insurance premiums have become an overlooked pressure point in household budgets. While general inflation is cooling, the cost of protecting your biggest assets—your home and car—continues to climb, often faster than expected. And for many families, this isn’t just an annoyance. It’s a signal to reassess how they protect what matters.

So what’s causing the spike in insurance premiums? More importantly, how should you adjust your financial plan? Let’s unpack what’s driving costs upward—and what you can do now to keep your protection plan both affordable and aligned with your life goals.

Insurance rates are based on risk—and in 2024, many forms of risk have become harder (and more expensive) to insure. Here’s what’s shifting under the surface:

1. Climate Costs Are No Longer Occasional

Floods, wildfires, hailstorms, hurricanes—extreme weather events are becoming more frequent and severe. For insurers, that means more claims, higher payouts, and tighter reserves.

Even if your home hasn’t been directly impacted, your premium could still rise as insurers spread the cost of higher climate-related claims across broader customer pools.

2. Construction and Repair Costs Have Climbed

Labor shortages, material inflation, and supply chain lags have made it more expensive to rebuild a home or repair a vehicle. That directly affects replacement cost policies, especially for homeowners.

If it now costs $400,000 to rebuild a home that cost $300,000 just a few years ago, your insurer has to adjust their risk exposure—and you’ll see that reflected in your premium.

3. More Legal Disputes Around Claims

Insurers are seeing a rise in litigation, particularly for home insurance claims. Disputes over repair standards, contractor costs, and liability issues are lengthening and complicating the claims process. That extra legal risk is now factored into pricing—even if you’ve never filed a claim.

Rising premiums aren’t just about monthly bills. They influence major decisions: whether to buy a car outright or lease it, whether to choose a home near a flood zone, even how much emergency savings you should hold. At the same time, many households are still underinsured in key areas—particularly for climate-related events like flooding.

So the real question is: how do you reduce costs without increasing vulnerability?

Step 1: Re-Shop Your Policy Annually—Not Just When It Hurts

Many people stay with the same insurer for years without rechecking prices. But the insurance market has shifted fast. Some providers have already adjusted to the new cost realities; others are just catching up. That creates opportunity for better-priced policies elsewhere.

Use online marketplaces or work with an independent insurance agent (whose commission comes from the insurer, not you). Re-shopping once a year—especially after a move, major purchase, or life event—can uncover significant savings or better terms.

Look beyond price. Evaluate financial strength ratings (via AM Best or Demotech) and claims service history. A cheaper premium isn’t worth it if the company delays or disputes claims when you need them most.

Step 2: Recalibrate Your Deductible—But Back It with Cash

Raising your deductible (the amount you pay before insurance kicks in) can lead to substantial savings. For example, increasing a car insurance deductible from $500 to $1,000 may cut your premium by 15% or more.

But higher deductibles only work if you can pay them comfortably in a crisis. This means your emergency fund should include at least:

• One full deductible for your home policy
• One full deductible for your car policy

If you don’t have that buffer, you’re not reducing risk—you’re just shifting it back onto your own balance sheet.

Step 3: Review Your Coverage—Not Just Your Price

Insurance should evolve as your life does. Yet many people haven’t updated their coverage for years.

Ask:

• Have you made safety upgrades to your home? (A new roof, storm shutters, security system?)
• Are you still paying to insure valuable items you no longer own (jewelry, art)?
• Is your older car still worth the cost of full collision coverage?

For cars, a good rule of thumb: if your vehicle is worth less than 10 times your annual premium for collision and comprehensive coverage, you may be over-insuring it. At the same time, don’t be too quick to drop less-visible protection like flood insurance. Standard homeowners policies often exclude it—yet climate shifts are putting more homes at risk, even outside designated flood zones. According to FEMA, just one inch of water can cause $25,000 in damage. And only around 30% of homes in high-risk flood zones have proper coverage.

Step 4: Ask for Discounts—Even If You Don’t Think You Qualify

Insurers offer dozens of potential discounts, but they don’t always apply them automatically.

For homeowners, possible discounts include:

• Going five or more years without a claim
• Installing smoke detectors, burglar alarms, or hurricane-impact windows
• Living in a gated community

For drivers, options include:

• Low-mileage discounts (often under 7,500 miles/year)
• Telematics or “safe driver” app programs
• Good student discounts
• Defensive driving course completion

And while bundling policies can reduce costs, it’s not a universal win. Sometimes separate policies from different insurers yield a better overall result.

Step 5: Improve Your Credit—It Impacts More Than Loans

In most states, insurers use credit-based insurance scores to help set premiums. That means your credit history can affect what you pay—even if you’ve never made a claim. According to Bankrate, a driver with poor credit pays more than double what someone with excellent credit pays for the same full-coverage car insurance policy. Improving your credit score by even one tier (e.g. from “fair” to “good”) can yield measurable savings over time—on both loans and premiums.

Step 6: Price Insurance Early—Before Buying a Home or Car

Too many people get excited about a new property or vehicle, then discover the true cost of insuring it after they’ve committed.

Make insurance pricing part of your pre-purchase checklist:

• For homes: Request insurance quotes before making an offer. Use tools like ClimateCheck to evaluate long-term flood or fire risk.
• For cars: Check premiums for multiple makes/models before deciding—especially if you’re considering a luxury or high-performance model.

In short: don’t separate the asset from the cost of protecting it. Insurance may be a monthly bill—but it begins as a strategic input.

Trying to save on premiums by cutting coverage may backfire. After major disasters, many homeowners find themselves underinsured—either because their policy doesn’t cover the full cost to rebuild, or they didn’t buy separate coverage for floods or landslides. Likewise, skipping adequate liability protection on auto insurance could expose you to out-of-pocket claims that exceed your policy’s limits. Insurance isn’t just a cost—it’s a buffer between your assets and unplanned financial loss.

To align your coverage with your current needs and financial goals, consider these reflection questions:

• If I had to pay my deductible tomorrow, could I do it without dipping into long-term savings?
• Have I adjusted my policy to reflect recent home improvements or life changes?
• Am I relying solely on default or employer-bundled policies without reviewing them annually?
• Do I know how much flood, fire, or storm exposure my property really carries—and whether I’m covered?

The answers can help you turn a rising-cost narrative into an opportunity to fine-tune your risk plan.

Rising premiums are a financial reality in 2024. But they don’t have to erode your stability. By viewing insurance as a dynamic part of your financial plan—rather than a fixed utility bill—you gain clarity and control. You’ll know when to adjust, when to switch, and when paying more is actually worth it. Because protection isn’t just about replacing what you lose. It’s about preserving what you’ve built—strategically, sustainably, and with intention.

In practical terms, that means asking yourself not just “What does this cost?” but “What role does this play in my overall plan?” Insurance isn’t there to eliminate all risk. It’s there to prevent financial ruin from events you can’t realistically self-fund. That includes long-tail risks—events like a fire, flood, or lawsuit that could wipe out years of savings or derail your homeownership journey. If you’ve worked hard to build equity, retirement capital, or a financial cushion, insurance is the line that protects those milestones.

And just like investments, insurance should evolve with you. As you gain assets, start a family, relocate, or retire, your risk exposure shifts. Good planning isn’t static. It adapts—quietly, but powerfully—when you do. Smart coverage isn't about spending more. It's about spending with purpose.