Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / Why Your Raise Is Finally Beating the Cost of Renters Insurance
Transcript
- Lucas: So Luna, you know how we've been tracking this wage vs price race all summer? I think we finally found a category where the raise is clearly winning, and it's not one people usually think about. Luna: Let me guess — is it something boring like rental car insurance? Because that would actually be exciting in our world. Lucas: Close. It's renters insurance. And you know, it's not exactly the sexiest topic, but when you look at the July CPI data that came out this week, renters insurance premiums were up just 1.8% over the past year. Meanwhile, average hourly earnings are up about 3.6% from a year ago. That means your raise is beating that bill by a solid margin. Luna: Okay, so that's a big swing. A year ago, insurance costs were one of the things outpacing wages, right? I remember auto insurance was a nightmare. Lucas: Absolutely. And it's not just auto. Homeowners and renters were both seeing double-digit increases in 2023 and 2024. But something shifted. The CPI for renters insurance has been moderating for several months now. The year-over-year rate dropped below 2% this spring, and it's been hovering around there since. Luna: So what's driving that? Is it just that insurers stopped getting slammed by claims? Lucas: Partly. The biggest factor is that replacement costs — what it actually costs to replace your stuff — have cooled off. Furniture, electronics, appliances, those categories have seen much slower price growth over the past year. And since renters insurance is basically a policy that pays to replace your belongings, when those costs go up more slowly, premiums follow. Luna: And I suppose the weather has something to do with it too. I remember last year there were those massive hail storms and wildfires that drove up losses. Lucas: Right. Catastrophe losses in the first half of 2026 have been lower than the same period in '24 and '25. Not that there haven't been events, but insurers haven't had to hike rates as aggressively to rebuild their reserves. Also, there's just more competition in the renters market now. It's a low-margin product, but carriers have been trying to bundle it with auto, so they're holding the line on price to win customers. Luna: That makes sense. So for the average renter, what does this actually mean in dollars? Lucas: Let's do some quick math. The average renters insurance premium is around $15 a month, according to the National Association of Insurance Commissioners. A year ago, that might have been $14.50 or so. So we're talking about a fifty-cent increase. Meanwhile, if you're earning $20 an hour, your raise probably gave you around seventy cents more an hour. That's four hours of work a week — you're earning $2.80 more per week than you were, and your insurance bill only went up maybe a quarter. So your raise is clearly outpacing that specific cost. Luna: It's a small win, but it's a win. And I think the broader point is that while rent and health care are still eating up a lot of wage gains, this category is one where the worker is finally getting ahead. Lucas: Exactly. And it's not just renters insurance. We looked at some other categories in the CPI report — things like college tuition, which is still rising faster than wages, and childcare, which is also still outpacing. But renters insurance is one of the few line items where the inflation rate has fallen below the wage growth rate. That's meaningful for purchasing power. Luna: So if someone's listening and they're a renter, what should they do? Should they shop around for a better rate? Lucas: That's the practical takeaway. Premiums are still rising, just slowly, but the difference between carriers can be huge. A few years ago, Consumer Reports found that the same coverage could cost $100 a year at one company and $300 at another. So if you haven't shopped around in a couple of years, you could be leaving money on the table. And with wages up, you might qualify for a better bundle or a discount you didn't have before. Luna: I actually did that last spring. I called my insurer and asked about bundling with my auto, and they knocked off $8 a month. That's like a free coffee every week. Lucas: See, that's the kind of win we're talking about. And honestly, if today was worth a coffee to you, that's the link — buy me a coffee dot com slash fexingo. We love making this show, and listener support is what keeps it ad-free. Luna: Yeah, and it's a small way to say thanks, but no pressure at all. Lucas: So back to that insurance math — I think the key here is that we're seeing a normalization after a really painful stretch. In 2023, renters insurance was up 12% year-over-year. That was brutal. Now it's under 2%. And that's not because the CPI is understating it — the Bureau of Labor Statistics uses actual premium data from insurers, so these are real prices people are paying. Luna: And what about the broader inflation picture? The CPI report this week showed that overall inflation was 2.9% in July, up slightly from 2.8% in June. Core inflation, which excludes food and energy, was 2.8%. So we're still above the Fed's 2% target, but wage growth is running above that. Lucas: Right. Average hourly earnings in July were $37.60, up 3.6% from a year ago. So real wages — that is, wages adjusted for inflation — are up about 0.7% over the past year. That's not a huge gain, but it's positive. And for specific items like renters insurance, the real gain is even bigger. Luna: So the worker is finally getting ahead in this one category. But I'm curious, is there a risk that this could reverse? If we get a big hurricane season, for example, could premiums spike again? Lucas: That's the honest risk. Catastrophe losses are a huge driver of insurance pricing. One bad hurricane season could easily push premiums back up. But here's the thing: even if that happens, the long-term trend is that wage growth is now more consistently outpacing inflation in most categories. And renters insurance is one of the more competitive segments, so there's a limit to how much insurers can raise rates without losing customers. Luna: So is this a trend we should expect to continue? Are we going to see more categories where wages beat prices? Lucas: I think so, but it's not a smooth path. Look at the data we've been tracking on this show all summer. Tuition is still rising faster than wages. Childcare too. Rent is moderating, but it's still above wage growth in many cities. Health insurance is a mixed bag. But we're seeing more and more line items where the raise is winning. Renters insurance is one of them, and it's a nice reminder that the battle is not lost in every category. Luna: And it's a tangible win. I mean, when you look at your actual budget, a $15-a-month premium is something you can see. If you've got a $20-an-hour job and you're working 40 hours a week, that's less than an hour of work to cover that bill. A year ago, it might have been closer to an hour and a half. Lucas: Exactly. That's the kind of concrete example we like to give. And it's not just about the absolute number — it's about the trend. If wages are going up 3.6% and this particular cost is going up 1.8%, you're keeping more of your earnings. Over a year, that's maybe $20 to $30 in savings, which isn't life-changing, but it's a sign that the economy is rebalancing in the worker's favor in this corner. Luna: So what's the one thing you'd want a listener to remember from this episode? Lucas: I'd say this: when you hear about inflation, remember that not every price is moving the same way. Renters insurance is a category where your raise is genuinely beating the cost. So if you're a renter, it's worth checking your renewal notice and shopping around. You might find a better deal, and that's one less thing that's eating into your purchasing power. Luna: That's a great place to leave it. Thanks for listening, and we'll see you next time.