How to Save Money on All Your Insurance Premiums
Insurance is an important tool to help you manage risk and protect the things of value in your life. However, the premiums for all the different types of insurance can add up quickly. How can you save money without dropping some of your insurance coverage? It depends on your policies and what they cover.
To start, there are three things that factor into the amount of premiums you’ll pay on almost every insurance policy you buy:
Bundling. Buying several different policies from the same insurance company (such as your homeowners and auto) is a great way to save.
Buying from the same insurer saves the insurance company time and money on processing and administration and they can pass some of those savings on to you.
Credit score. Your credit score is a factor in how insurance companies try to predict your future claims – which they use to price your premiums.
Their overall “insurance score” includes your credit score as a way of understanding how you manage your finances. Having a poor credit history and low score tells an insurer that you’re a higher financial risk, so they will charge you higher premium rates. Read more here about how to improve your credit score.
Deductible. The deductible amount you select for your policy is what you will pay before the insurance company starts to pay on a claim.
The lower the deductible, the higher the premiums and vice versa. If you select a high deductible (and lower premiums), make sure you keep the amount of the deductible in your rainy day or emergency fund accounts so you will have the money when you need it.
Here are a few more policy specific items that may help you lower the cost of insurance (be sure to check with your insurance company first to see if these apply to you and your policies):
Homeowner’s insurance: Some insurance companies will give you a discount on your premiums if you install fire extinguishers, sprinklers and alarm systems in your home. You may also consider removing any large trees that may be close to your home since they have the potential of damaging your property.
Auto insurance: The more expensive the car you own, the more your insurance will cost since the potential claim will be more. To save on auto insurance you can buy less expensive cars, take defensive driving classes, pay premiums annually (instead of monthly), or put them on automatic withdrawal. There are also discounts for students with good grades, safe driving records, and automobile safety features (air bags, monitoring devices, etc).
Life insurance: Taking care of yourself is important for many reasons, including the cost of life insurance. A few ways to lower your premiums include keeping a healthy weight and good bio-metrics like blood pressure and cholesterol, not smoking (this makes a big difference), not participating in high risk activities (skydiving for example), and paying premiums annually instead of monthly
Disability insurance: To save money on disability insurance, you can increase the waiting period on the policy. This increases the time before the insurance company would start paying your claim (from 60 to 90 days for example). You can also integrate the policy benefits with social security disability payments and reduce the period of time you would receive the benefit. In addition, if your employer or professional organization offers group discounts, you might also be able to find better pricing there.
Product insurance: Many stores sell product insurance and extended warranties (which is essentially insurance) on appliances and electronics. These are usually not a good use of your money. For things like this, it is better to “self insure”, which means retaining the risk and setting money aside in case something happens. Take the money you would spend on product insurance and put it in a separate account instead of buying the warranty. If nothing goes wrong, you still have the money and if something does go wrong, you can pay out of pocket from this account.
You should revisit all your insurance needs every few years (some more frequently, such as auto insurance) to determine if you still need the same amount of insurance and to shop around for the best prices.