The Rising Cost of Insurance: Why It’s Happening and How You Can Take Control

If you’ve noticed your insurance premiums increasing, you’re not alone. Over the past few years, insurance companies have struggled to remain profitable due to historically high losses from natural disasters, rising repair costs, and inflation. The result? Higher premiums for consumers. But while this trend might feel frustrating, there are ways you can take control of your insurance costs and make smarter financial decisions for the future.

Why Are Insurance Rates Rising?

Insurance companies base their rates on historical claims data, and recent years have been rough. Catastrophic weather events, inflation in construction and vehicle repair costs, and a rise in litigation expenses have all contributed to higher losses for insurance companies. They have had to adjust premiums to account for the increased risk to remain solvent.

The Power of Higher Deductibles

One of the most effective ways to lower your insurance premiums is by raising your deductible. While accepting more out-of-pocket expenses in the event of a claim may feel counterintuitive, it can be a smart financial move.

Why? Because higher deductibles mean lower premiums, allowing you to keep more cash in your pocket each month. Instead of paying extra for a low-deductible policy, you can set aside the savings into a fund for future claims. This approach lets you maintain financial flexibility rather than handing that money to the insurance company.

A Smart Solution: Insurance Savings Accounts (SB 25)

Kansas is considering legislation allowing consumers to set aside tax-free money to cover higher deductibles. The Insurance Savings Accounts (SB 25) bill, supported by the Kansas Association of Insurance Agents (KAIA), is designed to help Kansans save for rising insurance premiums and deductibles.

This bill would provide tax-free savings opportunities for insurance costs, similar to a Health Savings Account (HSA). Policyholders could contribute pre-tax dollars into these accounts and use them to pay for premiums and deductibles, giving them more financial flexibility while reducing overall insurance expenses.

Understanding What You Pay For

Insurance policies can include various endorsements and add-ons that enhance coverage but also increase your annual premium. While these features can provide valuable protection, it is important to evaluate whether you genuinely need each.

For example, do you need roadside assistance through your insurance, or would a third-party provider be a better deal? Are you paying for coverage on out-of-pocket items you could afford to replace? These are essential questions to ask when trying to balance risk and affordability.

A Short- and Long-Term Win

By raising your deductible and assuming more financial responsibility for more minor claims, you achieve two significant benefits:

You turn in fewer claims, making you a more desirable customer for insurance companies. Insurance carriers prefer policyholders with fewer claims, which can result in lower premiums over time.
You keep more cash in your pocket. Rather than paying higher premiums, you can use those funds to build your emergency fund, giving you financial security and peace of mind.

Final Thoughts

The cost of insurance is rising, but you have options. By considering higher deductibles, setting money aside tax-free (if SB 25 passes), and evaluating what features you truly need, you can take control of your financial future while still being protected.

If you have questions about your policy or want to explore ways to optimize your coverage, I’m here to help.

Let’s build a strategy that keeps you covered while making the most of your hard-earned money. Reach out to me anytime at Mike@goodmaninsurancesolutions.com or visit kansasinsuranceagent.com to learn more!

Stay protected and financially savvy!

— Mike Goodman, Goodman Insurance Solutions