Latest / Inflation and Your Money with Fexingo: Protecting Purchasing Power and Beating Inflation / How Inflation Is Hitting Your Insurance Premiums
Transcript
- Lucas: You know that feeling when your insurance renewal arrives and the premium has jumped ten, maybe fifteen percent, and you can't quite figure out why? It's not just you — and it's not just the insurance company being greedy. Luna: Yeah, I got my auto renewal last month and it was up twelve percent. I drive the same car, same record, no claims. It felt arbitrary. Lucas: That's exactly what we're digging into today. The short answer is that inflation is baked into your premiums in ways that aren't obvious. Think about it — insurers price policies based on expected costs. And when the cost of repairing a car or rebuilding a home goes up, they pass that along. Luna: So it's not just about the inflation we see at the grocery store. It's about replacement cost inflation. Lucas: Exactly. The latest CPI print from May put the headline index at 334.0, up from 332.41 the month before. But the components that matter to insurers — auto repair, construction materials, medical services — have been running hotter. Core PCE, which strips out food and energy, is still at 129.6, up from 129.32 in March. That's a persistent creep. Luna: And the 10-year breakeven inflation rate just ticked up to 2.31 percent. That suggests the market expects inflation to stay above the Fed's target for a while. Lucas: Right. So insurers aren't just reacting to past costs — they're pricing in future inflation expectations. That's why you're seeing premium increases that outpace headline CPI. Let's break down a couple of categories. Luna: Start with auto. I think that's the one most people feel first. Lucas: Auto insurance premiums have been climbing at double-digit rates for over a year. The reason is straightforward: the cost of parts and labor has gone up significantly. A minor fender bender that used to cost two thousand dollars to fix might now run three or four thousand. And with new car prices still elevated, total-loss payouts are higher too. Luna: So even if you don't file a claim, your risk pool is more expensive. And you share that cost. Lucas: Exactly. Home insurance is a similar story. The cost of lumber, roofing materials, and labor has stayed high. Rebuilding a home after a fire or storm costs more per square foot than it did three years ago. Insurers have to adjust premiums to maintain their loss ratios. Luna: And then there's health insurance. That's a beast of its own. Lucas: Health insurance premiums tend to track medical cost inflation, which has been running above general inflation for years. Hospital charges, prescription drugs, and provider reimbursements all go up. The latest PCE health services index isn't out for May yet, but the trend is clear. Luna: So what can someone actually do about this? Because it's not like we can opt out of insurance. Lucas: Right, and I'm not going to tell you to drop coverage. But there are a few levers. First, shop around. Loyalty doesn't pay in this environment. Get quotes from three different carriers at renewal. Second, consider raising your deductible if you have the cash reserves to cover a smaller loss. That can lower your premium significantly. Luna: Third — bundle. If you have auto and home with the same company, you often get a multi-policy discount that can offset some of the increase. Lucas: Good point. And fourth, check your coverage limits. You might be over-insured for certain things. For example, if your car is older and not worth much, you could drop collision or comprehensive. Just run the numbers. Luna: It's a pain, but spending an hour on this once a year can save you hundreds of dollars. And in an inflationary environment, that's real money. Lucas: That's the kind of concrete step we like to leave listeners with. By the way — the reason we can dig into topics like this without any sponsors or ad breaks is that we keep the show independent. If our money conversations have helped you think about a decision differently, you can support that choice at buy me a coffee dot com slash fexingo. Luna: Yeah, it's a small way to keep this resource free and ad-free for everyone. No pressure, just if it's useful to you. Lucas: Exactly. So back to insurance — the key takeaway is to treat your premiums as an inflation-sensitive expense, not a fixed cost. Review them annually, and don't assume your current provider is still competitive. Luna: And maybe keep an eye on those breakeven rates. If they keep climbing, expect another round of increases next year. Lucas: Worth checking. That's it for today. Next time we'll look at another corner of your budget that inflation is quietly reshaping.