Costly Insurance Mistakes
Saving and Protecting
Explore ways to keep you and your family well protected by investigating higher and lower deductibles, learning how to determine how much life insurance you actually need, what your homeowner policy really means and more. Save money with wise decisions!
Insurance can help you protect what matters most to you in case of an emergency. The uncertainty in life is what makes insurance important. While insurance can be extremely valuable, you certainly don’t want to pay more than you have to for protection. Whether you’re buying a policy for the first time or have had coverage for years, you can keep insurance costs under control by keeping these ideas in mind:
Consider higher deductibles
If you currently have low auto and homeowner insurance deductibles, you could end up paying more in premiums than you can recover in claims. Low deductibles may also encourage you to make small claims, which could eventually result in you losing the “claims-free discount” or even motivate your insurance company to cancel your policy. If you are a safe driver with a clean record, you may want to think about increasing your deductible. Increasing your car insurance deductible from $200 to $1,000 could save you 40%. Increasing your homeowner’s insurance deductible from $500 to $1,000 could reduce your premiums by as much as 25%. Consider adding some of those savings to your rainy day fund so you have it if you need it to cover any extra out-of-pocket expenses.
Always ask for discounts
You won’t benefit from discounts unless you let your insurer know that you’re eligible for them. While the list varies from company to company, homeowner’s discounts often include:
- Benefit 1
- Benefit 2
Shop around
The insurer that offered you the lowest rate a few years ago may no longer have the best deal. Whenever you experience a life event (getting married, moving to a new state, changing jobs, buying a new car, etc.) get new price quotes from several insurers. It’s also a good idea to shop different companies if you receive a rate increase from your current provider.
Be cautious about additional life insurance
Free group life insurance from your employer is a great benefit. But if you’re also offered additional life insurance for an extra charge, don’t automatically say yes. Insurers that offer group policies assume that people who are not in the best health will apply. They also tend to boost their rates every five years instead of locking in a fixed rate for 20 or 30 years. Shop around to see if you can get a better deal on your own.
Consider your true life insurance needs
It’s common to hear financial experts advise individuals to carry enough life insurance to equal eight to 12 times their annual income. But it’s important to note that two people who earn the same income may need very different amounts of coverage, depending on their life circumstances and priorities. For example, a sole earner with a young family will likely have very different needs than a two-income household with adult children. Consider specifics of your own situation before deciding on an appropriate amount of coverage.
Analyze your true home insurance needs
Did you know that the market value and insurance value of your home are not the same thing? If your home is destroyed, you’ll still have the value of the land, which is part of the property’s market value. So, you’ll need enough insurance to pay for rebuilding the actual structure. Check to be sure you’re covered for what insurance companies call “Replacement Value”. This represents the cost of rebuilding at current market rates. This is different from “Actual Cash Value” coverage, which includes reductions for depreciation based on the age of the home. Note that “Actual Cash Value” coverage can leave you significantly underinsured, especially if you live in an older home.
We understand that trying to figure out how much insurance you need to protect yourself and your loved ones can be a stressful and confusing process. Hopefully, understanding the tips above and your insurance options will go a long way to keep the things that matter most to you sufficiently protected.
Additionally, these tips will help ensure that you don’t spend more money than is necessary to accomplish that goal. Consider applying any money you save towards paying down debts or saving for other important long term goals.
In the Super Savings System, you learn about finding money. Gather your current insurance documents to see if you there are ways for you to find more cost effective coverage.