12 Ways to Save on Insurance

Insurance is a funny thing.  You’re paying for something you hope you’ll never use to replace things you already have.  In some cases, insurance is required.  But these days you can buy insurance for everything from autos to vacations.  How do you know what to insure and how much to spend?  Here are 12 tips to help you get the coverage you need without spending a fortune:

• Question yourself.  Before buying insurance, ask yourself the following questions:  Why am I insuring this?  Out of fear or necessity?  What is the replacement value?  Is the cost of insurance greater than the value?  Your answers will bring you back to the purpose of insurance, to pay for something you cannot afford to replace otherwise, and keep you from paying for anything else.

• Shop around. Review information offered by your state’s insurance division, then call around to several companies for their rates. Every time you get a premium notice, contact at least two other insurance companies to ask for competitive quotes.

• Get discounts. Ask your insurance agent about discounts. Most policies give discounts for safety features, for example anti-lock brakes and air bags in cars and alarm systems and smoke detectors for homes/apartments. Some insurance companies offer discounts for nonsmokers, good drivers – even non-drinkers. If you park your vehicle in a closed garage instead of a carport or driveway or drive a limited number of miles, you might qualify for a discount.

• Raise deductibles. A higher deductible leads to a lower premium. Keep in mind, the purpose for insurance is to make sure you have coverage for a disaster.  Fender benders on your car or slight damage to your house can be paid out-of-pocket.

• Reduce claims. Only make a claim when the cost/damage is substantial. Minor repairs should be funded out of your emergency fund.  Insurers are notorious for increasing the premiums of those who have cashed in on even low cost claims come renewal time.

• Don’t overinsure. Drop collision or comprehensive coverage on older cars. Determine how much your car is worth using the Kelly Blue Book. If it’s less than one thousand dollars, you may end up paying more for coverage than you would be able to collect on a claim. For life insurance, only insure for the amount needed to replace the income of the one being insured – not so the family of the deceased becomes suddenly wealthy.

• Avoid insurance coupled with investments. There are several life insurance products that mingle insurance and investments (they develop a cash value). Usually, these are very expensive insurance policies and not as good of performers as other options. It’s better to buy term life insurance and invest your extra money elsewhere.

• Don’t forget disability insurance. It’s much more likely that you’ll be disabled than it is that you’ll die during your working years.  Yet many Americans only consider life insurance. Be sure you have a solid disability policy in place – especially for the primary bread winner in your household.

• Buy smart. Purchase a car with a good repair record and low theft rate. Insurance will generally be less expensive.  Also buy reliable brands of electronics and appliances and forego the extra insurance at the register.

• Check the price. Double check your insurance policy after you receive it and make sure you’re getting the price you were quoted.

• Combine policies. If you own a home, consider a combined premium option, where you get insurance on both the home and your cars from the same insurance company. You can typically reduce your premium costs by 10 percent or so by simply having both policies with the same insurer.

• Pay annually. Pay your premiums once a year, rather than quarterly. That way you avoid the typical $5 to $10 “service fee” you get stuck paying each time you send in a payment every few months.

Use these tips to spend only what you have to on insurance.  Keep in mind the purpose of insurance, for protection rather than provision, and you’ll be sure that every cent you spend on insurance is well worth the cost.

Comments

[FinanceIsPersonal.com]

Question yourself is definitely the most important question. I've seen a lot of people just out of college buy life insurance on themselves when they have absolutely no use for it, no dependents to speak of, yet they buy it from work or the military since it's pushed and it's really cheap to get a small policy (< 100k).

[Chris]

Your reasoning is completely flawed about not being insurance when you don't need it, especially life insurance. Getting life insurance as soon as you can even if you have no dependents is one of the best things you can do for yourself as it's easy to change the beneficary, the $100,000 or $250,000 whole life policy you get at age 21-25 will cost you as much as the $40,000 one at age 40.

Another thing you need to factor in is health conditions, let say you smoke already that there increases you rate, your a little bit over weight and still young, your life insurance rates will still be acceptable but according to your advice if you don't NEED it, hold off on getting it. 5 years later, you're married and expecting your first kid, wow now i need insurance. In these 5 years you've put on a few more pounds, still smoke, and your blood pressure is high from stress, weight and lack of physical exercise from being busy with work and home. Now you're policy is 20 times more expensive IF you can even get insured.

Most life inusrance police are 3 strikes you're out, smoking is one, weight is one, good luck keeping that 3rd blank empty.

However one of the best life insurance policies you can ever get is a term life policy with return of premiums, especially as a mortgage protection policy. If you take it out within a year of the mortgage generally there is no need for a doctors health screening, the approval factors are nicer, they make sure your family keeps the house if you die and if you don't die you get all of your money back at the end of the term. Alot of these policies also offer disability insurance as a rider at a substantially cheaper price than standalone disability insurance.

[FMF]

Chris --

You can invent any scenario that will be contrary to any advice, but if you consider it, in most cases the advice to wait is spot on.

For instance, using your example above, let's say in those five years you've quit smoking, lost some weight, taken up cycling, and now have a stress-free job. Think your rates will be lower? Yep. See, I can come up with an easy example to counter yours pretty easily.

Maybe you should buy homeowner's insurance now because you'll own a house in the future. Or maybe you'll want to grab coverage for that car you'll own in three years?

See what I mean?

[Anthony]

Hi,
Let me tell you one thing that Insurance is not funny thing. You might have different view but as far consult as my knowledge only money is not important but we required INSURANCE in our life. We required insurance for car, home, health, dental and many more.

[Jerry]

Great tips. These are all things to consider when getting any type of insurance. I hope it leads to more informed consumers!

Jerry

[LC]

Here's a tip: Even if you are satisfied with your coverage and price, ask them every couple years if you qualify for any additional discounts. Here's why I say that.

When we moved, we looked for a new company for our insurance and were able to save a lot by doing so. That was 2 years ago, and since we already found the lowest rate we could, we didn't do too much more looking around. This week, we got our letter to renew, and our agent added a note that said they were able to save us $430 per year AND double our coverage and add roadside assistance. We didn't even qualify for any additional discounts that they specified, they just said they "reanalyzed our account." It may be that our credit scores are higher now but I'm not really sure.

So periodically ask your agent to determine if you can save any money. This is even more pertinent if you have gotten married, turned 25, added safety features, or had an accident that becomes greater than 3 years ago.