The rising costs of home and auto insurance are significantly impacting American households. The trends observed in 2022, where insurance rates saw substantial increases, have continued into 2023. According to S&P Global Market Intelligence analysis, both types of insurance have experienced about an 11% increase in costs by the end of July 2023, marking one of the most significant spikes in over five years.
The average cost of home insurance, as reported by Forbes Advisor, is around $1,582 annually for $350,000 worth of coverage, while the average cost for fully covering a vehicle is now approximately $2,150 per year. Cumulatively, this means that the average American homeowner and car owner are spending more than $3,700 annually on insurance alone.
Several factors contribute to these rising insurance costs. Extreme weather conditions, increased frequency of car accidents, and the effects of inflation are major contributors. Particularly notable is the situation in Texas, where there has been a 37.6 percent increase in premium rates over the last 20 months. Reports from the Texas Tribune highlight the influence of climate change concerns and inflation on rebuilding costs after natural disasters, leading to higher insurance rates in the state.
These insurance rate hikes come against the backdrop of a broader inflationary trend affecting the U.S. economy. Since the beginning of President Joe Biden’s administration in January 2021, inflation has markedly increased, affecting various sectors and the overall cost of living. Despite a 13.6 percent increase in average hourly wages since January 2021, the rise in inflation, pegged at 17 percent over the same period, offsets these wage gains, as highlighted in the CBS MoneyWatch report. This situation has led to an additional annual expenditure of approximately $11,400 for the average U.S. household to maintain their pre-inflation standard of living.
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