Insurance Coverage in Today’s World
People rely on insurance to protect their assets in a variety of scenarios—car accidents, fire, robbery, tornado, etc. If your home or personal belongings are damaged as a result of a covered loss, having insurance can help with the cost of replacing these items. With inflation in full effect and no end in sight, it’s more important than ever to make sure your most expensive items (like your home and vehicles) are covered, and you have enough liability coverage.
Insurance Costs
The pandemic has spurred a series of events that had a domino effect—people couldn’t work, which caused supply chain issues. Coupled with labor shortages, this led to shortages of many products, and basic economics tells us when demand is high and supply is low, prices go up. So why would insurance rates go up? After all, it is an intangible product that doesn’t require manufacturing and shipping, right? Well, it’s not quite that simple.
How Supply Chain Issues Impact Insurance
There is a global semiconductor chip shortage due to the labor shortages that resulted from the pandemic and even the war in the Ukraine. These chips are used in most cars, especially new cars. According to Consumer Reports, auto manufacturers built 1.7 million fewer vehicles in 2021 than in 2019, the last full year before the pandemic. They also reported that the war in Ukraine has disrupted the global supply of neon gas, which is used to make those chips. All of this has led to a lower supply of new cars and created higher demand for used cars, and prices for both are going up as a result. Here’s what that means for insurance companies:
- If an insured is without a car because theirs was totaled, repairing or replacing it will cost more.
- If an insurance company is paying for a rental car while an insured’s car is being repaired after an accident, they are paying longer because it takes longer for the car’s parts to come in. Labor shortages may lead to longer repair times as well.
- Medical costs have also increased, so it costs more to pay for someone’s medical expenses if they are injured in an accident that’s covered by an auto or home policy.
When it comes to home insurance claims, supply chain issues are causing delays in the delivery of building materials and appliances. In addition, costs of those items have gone up significantly as well. The same goes for replacing furniture, making replacement and rebuilding costs go up.
This means when insurance companies have to pay more to replace or repair items, or pay more for medical expenses, it is sometimes reflected in rates.
Do You Have Enough Insurance?
In this economy, it’s a good idea to check. A Shelter agent can review your insurance needs with you and discuss coverages you may not know about that can help keep you from being underinsured in this volatile economy. Here are some scenarios and coverages you might want to ask about:
What if you insured your home for $250,000 but it now costs $350,000 to rebuild?
If you add restoration cost or expanded restoration cost to your policy it can help you rebuild without costing you more out of pocket. There are limitations and restrictions, and your deductible will apply to any coverage you have, but your agent can explain all of that.
What if the bodily injury coverage on your auto policy is $100,000 but you injure someone in an accident and their medical bills total $125,000?
You can add medical payments coverage to your policy for a slightly higher premium to help with that difference.
What would you do if you financed a brand new car for as 72 or 84 months and it is totaled in an accident?
If it was totaled during your first 12 months of ownership and has fewer than 15,000 miles on it, Shelter’s new car replacement coverage (which is included in all personal auto policies) can replace it. If not, and you purchased gap insurance, it can help pay the amount you still owe on your car.
Umbrella Insurance: An Unsung Hero
If you have all of your other insurance with Shelter, ask about our umbrella insurance. Consider these scenarios:
- The babysitter has tripped and fallen over a toy and is injured.
- You have to swerve to avoid hitting another car—and instead hit a pedestrian.
- Your daughter and her friends took social media to a new level and your child is being accused of slander.*
A personal umbrella liability policy provides an extra measure of coverage when your policy limits aren’t enough to cover damages from situations like these. For example, if your policy limits in an at-fault accident are $100,000 but damages exceed $100,000, you will be expected to come up with the difference. An umbrella policy can help you cover the difference. It can also provide coverage for you and the members of your household if you are sued for certain things and help cover your resulting legal fees.
It's worth your time to talk to an agent about your insurance coverage. They can answer your questions, explain coverages you may not know about and review any discounts you may be eligible for with you so you can rest assured that you have the right coverage.
*These situations are generalized to illustrate common scenarios where umbrella insurance may be used. Actual coverage for any situation can only be determined by its particular facts.
The product information contained on this website is informational only and not a statement of contract. All coverage options are subject to the provisions of the policy purchased and details of the policyholder's situation.