The expense of insurance premiums can significantly impact your budget. Most people accept the rate that their insurer gives, thinking it’s the best deal. With the right strategies and with a little work, you can reduce your insurance cost without sacrificing protection. These tips can help you save hundreds, if not thousands, of dollars on your home, auto, and other insurance policies, while still maintaining the coverage that is needed for your lifestyle.
Understanding Your Coverage Needs
Understanding what you need is the first step to saving money on insurance. Most people overinsure with unnecessary extras or underinsure to the point of financial ruin. Evaluate your current assets and risks. Consider factors such as your car’s value, age, and how frequently you drive when deciding on auto insurance. You may not need collision and comprehensive coverage if you have an older vehicle or a car that is fully paid for. Assess the replacement value of your house and possessions when evaluating homeowners insurance. Do not consider the market price. By assessing your needs, you can avoid paying for unnecessary coverage and ensure you are adequately covered where it counts most. You can use this information to make informed decisions regarding deductibles and coverage limits.
Compare Rates
The formulas used by insurance companies to calculate premiums can differ dramatically. One company may charge $800 for the same policy, while another might charge $1200. Compare quotes with at least three or five different insurance companies every year. You can use online comparison tools to compare quotes, or you can contact independent agents that represent several companies. Compare quotes for the same coverage limits, deductibles, and features. Do not only look at the price, but also the financial stability of the insurer and their customer service ratings. If the company offers better customer service or claims handling, a slightly higher premium may be worth it. Your ideal insurer may change over time as your circumstances change. What worked well five years ago might not work today.
You can increase your deductible.
The deductible is what you have to pay before your insurance kicks in. Raising your deductible can be a quick way to reduce your insurance premiums. By increasing the deductible on your auto insurance from $250 to $500 or $1,000, you can lower your premiums by 15-30%. Homeowners insurance follows the same principle. If you do need to make a claim, you should be able to afford the higher deductible. Put the deductible in an emergency fund to be prepared. Calculate the amount you will save each year with a higher deductible and how long it will take you to recover that saving if you have to pay the deductible. Math can often work in your favor. This strategy is best for those who are cautious and do not file many small claims.
Bundle Your Policies
Insurance companies often offer discounts for purchasing multiple policies. Bundling auto and home insurance with the same provider can save you 10-25%. Some insurers offer discounts if you add life insurance, umbrella policies, or business insurance. Bundling does not always mean a lower price. The multi-policy discounts may not always offset the higher rates that some companies charge. Compare the bundle price with purchasing separate policies at different companies that specialize in each coverage type. Calculate your total insurance costs both ways. Consider the convenience of having your insurance policies under one provider, as this can streamline billing, claims, and communication.
Keep a good credit score
In most states, your credit score has a significant impact on the cost of insurance. Credit-based insurance scores are used by insurers to predict your likelihood of filing a claim. People with better credit scores pay less for the same coverage, while people with bad credit may pay more. Pay your bills on time. Keep credit card balances down and avoid unnecessary credit applications. Regularly check your credit report for errors, and dispute any that you find. Contact your insurer if your credit score has increased since you purchased your policy to find out if you are eligible for lower rates. Some companies adjust your rates automatically when they perform periodic credit checks. Others require that you request a review. Even a modest increase in your credit score could translate into significant savings on insurance premiums.
Enjoy Discounts
Many insurance companies offer discounts to their customers that they never take advantage of. Look for discounts on auto insurance based on a good driving record, defensive driving classes, anti-theft features, safety features installed in your car, low annual mileage, good grades at school, military service, and professional affiliations. Some homeowners may qualify for discounts if they have security systems, smoke alarms, storm shutters, or newer roofs. They might also be eligible for discounts based on their age, claim-free periods, and other factors. Some insurance companies offer discounts to customers who have been with them for a long time or those who set up automatic payments. You can ask your agent or representative of the company for a list of all discounts available and how you may qualify. This list should be reviewed periodically, as your eligibility may change. Additional savings could be unlocked by installing a security system or taking a defensive-driving course.
Review your policy annually
You may find that your insurance needs or circumstances change with time. However, your policy may not automatically reflect these changes. Remind yourself to review your policies at least one time per year. Consider any changes that may have an impact on your insurance needs or costs. You may have paid off your auto loan and don’t need gap insurance or installed a security device that is eligible for discounts. Your teenage driver may have moved to college and no longer uses the family vehicle regularly. Marriage, divorce, retirement, or job changes are all life changes that can affect your insurance rates and needs. Check if the coverage limits you have in place still make sense during your annual review. You may have added valuable items to your home, which would require higher coverage limits. Or, the value of your home might have increased. This check-up will ensure that you are not paying for insurance you don’t require while also ensuring you’re adequately covered.
Start Saving Today
It’s not necessary to make drastic sacrifices or use complicated strategies in order to lower your insurance rates. Over time, small changes such as increasing your deductible or asking about discounts can result in substantial savings. It’s important to take action, rather than just accepting the rate you are currently paying. Implement one or two strategies first, and then work your way through the rest. Insurance is a relationship that lasts a lifetime, so the savings will continue to grow year after year. Even modest savings today can amount to thousands over the course of your policy.
FAQs
1. How frequently should I compare insurance rates?
Compare rates at least every 12-18 months or when you have a significant life event, such as moving, getting married, or purchasing a new vehicle. Set an annual reminder so you can get the best rates.
2. Can I lower my insurance rates by asking my insurer?
Most insurers are willing to review your account and offer discounts when you ask. However, they will rarely lower your rates on their own. Calling to discuss options is worth it, especially if your situation has changed or you have been a loyal client.
3. How much insurance can I save?
These strategies can help you save anywhere from 10% to 30%, depending on where you are in life. Others may save more money by switching companies or increasing their deductibles.
4. Is it advisable to switch insurance companies just for a small saving?
You should also consider other factors, such as the quality of customer service, the reputation for handling claims, and the convenience. Savings of less than $100 per year might not justify switching, but bigger savings are usually worth it.
5. Does the insurance discount expire?
Some discounts require continual qualification, whereas others are permanent. Safe driver discounts may be removed following traffic violations. Good student discounts usually expire after graduation. Check your discounts every year to make sure you are still eligible.
