As a note, as I explained in a previous post, I am not a proponent of slashing insurance expenses across the board without understand the long term ramifications. It definitely can be expensive to be cheap. But, with a little knowledge, you can put real money in your pocket in one short afternoon.
How can you do you save some money? By reading the following tips:
Insurance Economics 101: Ways To Put Real Money Into Your Pockets
- RAISE YOUR DEDUCTIBLES. Many people have the frame of mind that, in the event of a loss, they want to pay a little as possible. While this does make sense, looking long term, the average person files a claim once every 13 years. If you raise your deductibles up from $500 to $1,000 or more, you can easily save 10?15% off your annual premium. If you are paying $800 per year, this easily translates into $80 ? $120 per year. Multiply that by 13 years and ($1040 ? $1,560) you have saved REAL money.
- USE A MULTI-POLICY DISCOUNT. If you trust your insurance agent who handles your home insurance, ask them to also provide your auto insurance. Yes, you may have a great rate with a discount auto insurance carrier but the multi-policy discount is easily 15% discount off both the home and auto premiums. Many are surprised that they save about $300 per year doing this. A few insurance carriers are now giving multi-policy discounts up to 7% if you insure your auto and life insurance together.
- IMPROVE YOUR CREDIT SCORE. Many insurance carriers now rely heavily on your personal credit score in determining your premiums. So, by keeping your credit score a high as possible, you will get the best rates.
- PAY YOUR PREMIUM IN FULL. If your budget allows for this, insurance companies are now giving 5%+ discounts for clients who pay in full for home and auto insurance. You also will save the administrative fees they charge to provide you with a monthly bill.
- INSTALL ALARMS. A centrally monitored home alarm will save you about 10% per year. You will also see some savings if you have deadbolts, smoke detectors and fire extinguishers in your home. But, on an auto, the alarm discount is a measly 1-3%, regardless of the alarm your have, be it even the high-end services like LoJack, OnStar etc.
- INSURE YOUR HOME ? NOT THE LAND. Again, see my previous post. But, in summary only insure the cost to rebuild your house, not the market value, which includes land.
- REMAIN LOYAL. If you put everything with one company, usually after 3 years, you may see your insurance premium lower by 5% through a loyalty discount. After 7+ years, this discount can be closer to 10%.
- GET REPLACEMENT COST COVERAGE. This idea doesn?t put money into your pocket immediately BUT during a claim, you will be happy that you spent a few extra dollars. There are several places you should have replacement cost:
- Make sure your home has Guaranteed Replacement Cost Coverage on Dwelling. Or at least make sure you insure the structure for 80% of the ITV. Please see my previous post. This can save you thousands and thousands of dollars.
- Make sure you have Personal Property Replacement Cost on Contents. In the event of a loss, if you don?t have this coverage, that $1,000 TV you just bought will have depreciated and you may see only $800 come back to you.
- With regards to your auto, this applies only is you buy a NEW CAR. Get GAP coverage from an agent, not the finance company. This will simply provide you insurance to cover the difference between what you owe and what your car is actually worth if your car is totaled.
- DON?T FILE SMALL CLAIMS. Yes, we all buy insurance to financially protect us from claims. But, please don?t file a claim if it is a few hundred dollars over your deductible. As I previously mentioned, the average home claim is every 13 years and the average auto claim is every 5 years. Insurance companies would rather pay you $300,000 every 13 years versus paying you $400 every other year. Insurance carriers like severity?not frequency:
- Homes: Someone breaks into your garage and steals 2 bikes and your lawnmower. Total loss is $1,300. You have a $1,000 deductible. Yes, you can file a claim but I would strongly discourage you from doing it because with one claim, your rate won?t increase a lot, but you are now in a precarious situation for the next five years. If you file another claim, regardless of size, you can have your policy dramatically rated up for the next five years or simply canceled. You will be able to buy insurance but at 175% ? 300% more for at least three years.
- Autos: Pulling out of your garage you sideswipe your car; you back into a fire hydrant, etc. Total loss is again $1,300. You have a $500 deductible. Again, I would strongly discourage you from filing the claim. If you file the claim for $800, this would be a covered claim and it would be recorded as an At-Fault accident. At renewal, your auto policy could increase by 30% for the next 3 years AND you will lose safe driver discounts. On an average auto policy of $600 per six months, your $800 claims will cost you $360 per year for 3 years.
AND…THE MOST IMPORTANT WAY TO SAVE MONEY IS…
- WORK CLOSELY WITH YOUR AGENT. If you ask your agent to shop you around on a regular basis, you will be able to level out the ups and downs of your insurance premiums. On average, insurance premiums DO increase by 3-5% per year, claims or not. On your home policy, in year one, you insure your home at $600,000. At renewal, the coverage will be $618,000+. This causes your premium to trend upward over time. A good insurance agent will be able to work with you and keep your premiums manageable and coverage adequate to fully protect you and your family.
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