KALONA

Auto insurance should be a straightforward game: drive safely, pay low premiums. But things have gotten complicated lately.

“Right now, we’re entering a hard market. Basically, what that means is, companies are tightening up their leash on what they accept,” Shawn Powell, owner of Southeast Iowa Insurance, says.

Property insurance companies have taken serious losses in recent years, in part due to natural disasters. The 2020 Midwest derecho was particularly memorable; causing more than $11 billion in damages, it is the most costly thunderstorm in U.S. history. The E4 Tornado that leveled farmsteads in Keota and Wellman in March 2023 is still fresh in our minds.

Other insurance losses are thanks to more careless drivers. In late 2020 and early 2021, fatal auto accidents saw a sharp increase nationally, and while that has rate has since declined, it remains elevated above pre-pandemic levels. Generally, auto insurers are “seeing an uptick in claims,” Powell says, and that is costing them.

And then there is that little problem we’ve been having with inflation and a tight labor market. These two factors mean that any time your vehicle needs to be repaired or replaced, the expense is greater than it used to be – about 30% greater.

What costs the insurance companies costs us. When insurers need to bring in more revenue to cover losses, they first look to rate increases, which “have to be okayed by the state of Iowa,” Powell explains. After that, they start trying to reduce their level of risk; that means drivers they previously would have insured no longer meet their standards.

“Some people who normally, two or three years ago, we could have put with any company, now we have a smaller number of companies we can choose from because they’re not meeting the guidelines,” Powell says.

So, your 10-mile-over speeding ticket and one at-fault accident might not have been a big deal a couple of years ago, but today they could mean your auto policy won’t be renewed by the carrier, sending your agent on a search for another company to insure you as a higher-risk driver – at a higher cost.

Drivers are also used to their violations not being held against them after three years. “Now they’re getting up to five, some are even looking back seven years,” Powell says.

And we haven’t even talked about the other factors taken into consideration when determining the premium you’ll pay: your GPA if you’re a student, your credit report if you’re an adult. It’s a pretty sticky wicket.

There are some things you can do to keep your auto policy active and affordable in addition to behaving like a saint. First, Powell recommends, stay with your current insurance carrier.

“Right now, I believe that loyalty to a company is very important, just because of it being a hard market,” he says. “If you’ve been with a company for quite a while, I’m suggesting to people to ride out the storm here for the next one to two years, because if you do have a claim in that time, you’re more likely to be able to stay insured with that carrier because you’ve been there for X amount of years. If you’ve just been moved to a company, and you have a claim in that first year, I’ve seen some companies that are saying, ‘Hey, at the next renewal, we’re going to non-renew you because you had a claim.’ That’s how tough it is right now.”

Powell adds that this is true for all insurance types, not just auto.

Second, you might have a look at your deductibles, that amount you pay out-of-pocket if you do have a claim. In the past a $100 deductible for comprehensive and $250 for collision coverage might have been reasonable, but today many insureds are going higher.

“What I’ve been seeing is $500 for comprehensive and $1,000 for collision is generally right now the better money buy,” Powell says. “People are saying, ‘Okay, if I cause an accident and damage my own vehicle, I can pay $1,000, but the insurance company will pay the rest,’ is basically how that works.”

For older vehicles without a lien, physical damage coverage may not be desired as the value of the vehicle is low. In these cases, liability-only coverage would be the least expensive option.

Extras like towing, rental reimbursement, and roadside assistance are also perks you might eliminate to reduce your premium.

What you should not do, Powell strongly cautions, is reduce your liability limits.

Liability coverage protects you financially if you should cause bodily injury or property damage in an accident. “Average limits are $250,000 per person, $500,000 per accident for bodily injury liability -- what you do to the other person’s body – and $250,000 or more for property damage – what you do to the other person’s property. And then having a personal umbrella on top of that is very important. That gives you another million dollars on top of your other limits,” he says.

Insurance needs vary and should be discussed with your insurance agent before making any changes.

As always, drive safely.

Southeast Iowa Insurance has locations in Wellman (319-646-2311) and Kalona (319-656-5145). The agency represents more than a dozen insurance companies offering commercial, personal, and farm policies.