Summer 2022 Insurance Guide
By Michael Giusti
School’s out and so is the sun. That means summer is upon us, and along with summer comes a host of insurance-related topics worth exploring, perhaps poolside with a frosty beverage.
From travel to auto and homeowner’s policies, and even health insurance, summer is a good time to take stock and ensure your family is protected and well insured.
So, find an umbrella for your drink while we break down insurance-related issues for the summer.
This summer seems to be the summer of so-called revenge travel. After two summers cooped up at home, an increasing number of people are ready to hit the road, even if it means spending a little more on their trips this year.
According to the US Travel Association, demand for travel this summer is finally exceeding the pre-pandemic numbers of 2019, logging in at $100 billion. And much of that travel is happening here in the United States.
A big reason travelers aren’t fully ready to head abroad is that there are still COVID travel restrictions in many countries, not to mention global uncertainty surrounding the war in Ukraine.
Still, overseas travel is slated to be back to about 43% of its pre-pandemic numbers — by no means a recovery, but it is something.
People who do travel abroad are increasingly required to purchase travel insurance as a condition of getting a visa.
That is one reason the travel insurance industry has been doing brisk business. But beyond legal requirements, the pandemic has also raised the profile for travel insurance and made people who would have never even thought about buying it consider travel insurance.
Typical travel policies cover the cancelation or interruption of your trip. They can also cover medical emergencies that pop up while you are away from home.
The cancelation portion is useful for any unexpected circumstance, such as a canceled connecting flight, a storm impacting your destination city, or sudden illness of one of the travelers — yes, even COVID.
The medical portion is essential overseas, where your home insurance policy may not extend coverage, and handy within the United States, where it makes up the difference between in-network and out of network costs, which can be substantial.
And if the worst happens, many travel policies include a medical evacuation option, which will pay to transport you to a health care facility that is up to the task of treating your emergency — a handy component, especially if you are spending the summer backpacking in the deep woods.
Travel insurance covers unexpected circumstances, but what it doesn’t cover is fear of travel — if you are suddenly worried about heading to your location, that is not enough to kick in coverage — unless you opted for the more expensive and less generous cancel for any reason policy.
If you are traveling abroad, it is also important to know that war is specifically excluded in most, if not all travel policies — something to keep in mind in case your itinerary takes you close to a global hotspot.
Looking beyond travel insurance, two other factors affecting travel this summer are the rising costs of gasoline and plane tickets.
With gasoline nearing $5 a gallon in much of the nation, hitting the road is a lot more expensive than it was in years past.
And getting on a plane isn’t a whole lot better. A mix of staffing shortages, rising jet fuel costs, and planes and routes that were mothballed during the pandemic means that more people are fighting for fewer airline seats, driving up the cost to fly.
Still, summer beckons, and even with higher prices, many Americans have their sights set on a dream vacation this year.
With gas prices driving up the cost of going places, it also isn’t good news to many motorists that the average cost of auto insurance is also edging up. Some estimates show across-the-board average premium increases of around 4% this summer, with some states looking at increases of as much as 20% for some classes of drivers.
One of the causes of those higher premiums is supply-chain-driven inflation.
As the cost of vehicles goes up, so does the cost of replacing them after an accident.
And when components, like the much-talked-about microchips, are hard to find, the price for the ones that are available goes up. But component pricing isn’t’ restricted to chips. Nearly every part that goes into a vehicle has seen price increases in the past year.
Add to that, an expensive past few years of natural disasters that cost insurers a pretty penny in auto claims, and premium increases make some semblance of sense.
With those costs edging up, TransUnion found in its latest Personal Lines Insurance Shopping Report found that 39% of consumers reported shopping for new auto policies this year.
In addition to shopping around, they found that consumers are looking more favorably on telematics devices, which track a driver’s habits and behaviors, which gives the insurer a better idea of the risk they represent. Most people, though not all, who opt in for a telematics device end up saving money on their premiums — often a substantial amount.
According to TransUnion’s survey, the number of consumers who accepted a telematics offer from their auto insurance provider increased 33% since the end of 2021.
Summer is a good time to shop around for homeowner’s insurance as well. TransUnion’s survey showed that 30% of homeowners went looking for better prices, and of those, 61% opted to switch to a less expensive homeowner’s policy.
It also makes sense that homeowners are seeing an increase in premiums this summer.
With a red-hot housing market, home values are way up — more than 30% in many markets. Higher home values mean more to insure, and higher premiums.
Whether increasing interest rates will put a damper on those increasing prices remains to be seen, but even if it does, inflation in the construction industry means that even if the price of the house doesn’t keep rising, the cost to repair it is.
Much like with auto insurance, telematics are also available for some homeowners. In a home, telematics devices can be fire alarms connected to a central station that can call for help automatically, or flood sensors that would head off a leaky pipe before it becomes a catastrophe.
As connected devices expand through the home, you can be sure insurers will be interested in tapping into them to help keep the home safe — not to mention heading off a costly claim.
With summer, three major natural disasters come to mind — wildfires, hurricanes, and floods.
While hurricanes are covered by standard homeowner’s policies, it is important to bind them as soon as possible, because many will not issue new policies while there is a named storm in the Atlantic Basin. And in many storm-prone areas, those policies come with costly “named storm” deductibles, which can easily run 3% of the value of the home before homeowner’s insurance kicks in.
Floods — including those caused by hurricanes — are never covered by homeowner’s insurance, and require a separate federally backed flood insurance policy. It is essential to get a flood policy — even if the home is outside a named flood zone, and before anything is brewing in the tropics.
Wildfires are typically covered by homeowner’s policies, but increasingly that may vary by geographic location and by policy. Just like with flood policies, it is important for any homeowner who might be at even a slight risk of a wildfire to understand how that damage is, and is not, covered by their particular insurance policy. Always read your policy language, but when in doubt, just call your agent and ask directly.
Fun in the Sun
Pools and cookouts are iconic summer fun. But if you are hosting the party, make sure you understand your state’s social host liability law. In many states, if a host serves their guest alcohol, and that guest goes on to cause an accident after leaving that party, the host can be held responsible.
If that is the case in your state, make sure to check your homeowner’s insurance liability limits to see if you are properly covered.
Another costly liability many homeowners may not consider when they invite guests over is a dog bite. While nobody thinks their family pet is going to attack their guests, when it does happen, it is costly — often topping the $50,000 mark in liability to the owner.
In most cases, a homeowner’s policy would pay for that dog bite, but there are exceptions — specifically around the dog’s breed. Many insurance policies list breeds that are excluded for coverage, so it is important to know if your beloved pet is covered by your policy.
Having friends over to swim is also one of the rewarding activities of summer, but insurers know well that pools represent liabilities. Homeowners with pools pay more for their premiums to account for the possibility that someone slips and falls on the deck, or hits their head while diving in.
In most cases the liability limits built into the homeowner’s policy are sufficient, but if a family has substantial assets, or substantial risks, and umbrella liability policy is an inexpensive way to bump up that liability protection.
And while the gig economy has long since taken hold in America, anyone who chooses to make a little extra cash by renting their home or their pool needs to make sure they understand how, and if they are insured.
Renting your pool or home is a commercial activity, and so it is not covered by typical homeowner’s policies. Anyone who decides to do this needs to make sure they either get a rider for their homeowner’s policy to cover it, or get coverage from the rental service. If they opt for the coverage provided by the rental company, it is essential that they understand what is covered, what is not covered, and what timing restrictions might be involved.
While health insurance is a more relevant conversation in the fall, paying attention to it in the summer does make some sense.
First, if a travel destination requires vaccines, it is important to schedule with your doctor in a timely manner to get those administered ahead of the trip. And that goes for the kid’s annual vaccinations and back-to-school shots.
When it comes to insurance premiums looking ahead, there have been mixed messages in the press.
On the one hand, insurers announced this summer that they will be issuing rebates to health insurance customers. That might seem like it means health insurance premiums are slated to get less expensive.
However, those rebates are based on a rule in the Affordable Care Act that says, based on a three-year average, health plans must spend a specific portion of their premiums on health care costs or else they must issue rebates. The three-year average is important because of the pandemic.
Those rebates have as much to do with pandemic-induced mismatches in pricing and patient health care usage than they have to do with prices moving forward. Because hospitals canceled elective care during the heart of the shutdowns, and because people were hesitant to leave the house for routine care, those health costs were artificially low.
On top of that, in 2019 many Marketplace insurers raised premiums ahead of the uncertainty over whether the Supreme Court would strike down the Affordable Care Act. At this point, those uncertainties are settled, and things appear on the verge to a return to normal pricing patterns.
Despite those rebates, paperwork being filed by insurers looking ahead to 2023, including their loss ratios, hint at rising premiums in the near future.
Summer is here, and everyone is itching to relax in the sun. But while you are letting off steam, it might make sense to give some thoughts to insurance concerns. Because, even though insurance may not be on everyone’s checklist for fun, it is going to be there to protect them if something goes terribly wrong.
Michael Giusti, MBA, is senior writer and analyst for InsuranceQuotes.com