When looking for ways to trim expenses, it may be tempting to cut corners on your insurance coverage. Don’t get caught in this trap. Making mistakes with your insurance can leave you dangerously underinsured. There are smart ways to save while also ensuring your assets are properly protected. This article outlines some common insurance mistakes and provides tips for saving money the right way.
Wrong or Right?
▪ Wrong – Insuring your home for market value rather than the cost of rebuilding.
▪ Right – Consider a higher deductible. Increasing your deductible to $1,000 could save as much as 25 percent on your annual premium. On average, homeowners file a claim every eight to ten years, so the savings in premium will definitely add up over time. Set aside the money you save by increasing your deductible, and you’ll have the money ready should the need arise to file a claim.
▪ Tip – Secure the right coverage for your home by insuring at replacement cost, not market value. For more information on replacement cost, check out this article: https://news.leavitt.com/publications/home-replacement-cost/
▪ Wrong – Not purchasing renters insurance and thinking you only need insurance if you own a home.
▪ Right – The policy your landlord has to insure the home or apartment you are renting will not protect your personal possessions in the event of fire, flood, theft, etc. Don’t skip out on this important coverage. Renters insurance is more affordable than you may think, with the average cost of a policy being about $200 per year.
▪ Wrong – Insuring your vehicle for the minimum amount of liability protection legally required in your state. While this may save you some money on your monthly premiums, this could end up costing you more in the long run. Accidents can easily cost more than the state-required limits. If the cost is more than what the insurance covers, you will be responsible for the remaining amount, resulting in a serious financial burden.
▪ Right – Consider a higher deductible to lower your premium. Also, research insurance costs before you buy a new or used vehicle. If you know what to expect on cost, this will help guide you in purchasing a vehicle with an affordable insurance rate. Discounts may also be available for vehicles with certain theft-deterrent and safety features (air bags, anti-lock brakes, daytime running lights, etc.). As a rule of thumb, you could also consider dropping collision and / or comprehensive coverage on older vehicles valued at less than $1,000.
▪ Tip – for more information on maintaining the right insurance coverage for your automobile, check out the tips in this article: https://news.leavitt.com/newsletters/personal/automobile-accident/
▪ Wrong – Cancelling or not purchasing flood coverage. Flood damage is not covered under standard homeowners and renters policies, however you may be at higher risk for flooding than you realize. According to the National Flood Insurance Program, 90 percent of all natural disasters in the U.S. involve flooding.
▪ Right – Know the cost of flood insurance before buying or renting a home so you can factor that into your total home / rental expense.
Choosing an Insurance Company
▪ Wrong – Choosing an insurance company based on price alone.
▪ Right – Choose a company that is financially sound and has a reputation for exceptional customer service. Check http://www.iii.org/article/how-to-assess-the-financial-strength-of-an-insurance-company to learn more about assessing the financial strength of the companies you are considering. Ask friends, family, and coworkers for recommendations. Remember, the insurance experience goes beyond paying a monthly premium – if you have to file a claim, you will be working with the company to resolve that claim, so you need someone who is responsive to your needs.
More Money-Saving Tips
Take advantage of discounts. Talk with your agent to find out what discounts are available through the insurance company you have chosen (or are considering). In addition to discounts mentioned earlier in this article for auto insurance, other discounts may include the following:
- Multi-policy discounts (may decrease your costs from 5 to 15 percent).
- Discounts for home security devices (smoke detectors, burglar alarm, dead-bolt locks).
- Discounts for long-term policy holders (make sure you are getting a good deal by comparison shopping periodically).
- Good student discounts (auto insurance).
- Age-based discounts (often apply for age 55 and older).
Shop around. Different companies price risk in different ways, so get quotes from multiple insurance companies. An independent agent can do this for you so you have a good idea of your options.
Maintain a good credit history. In many cases, your credit information is taken into consideration when insurers price homeowners insurance policies.
Review your coverage on an annual basis. Are there items you’ve been paying to insure that have depreciated in value or that you no longer own?
Be more disaster resistant. Practice behaviors that lessen your risk. Here are a few ideas along with article links that provide further tips.
- Practice defensive driving: https://news.leavitt.com/newsletters/auto-accidents-defensive-driving-reducing-travel-risks-winter-2013/
- Avoid distracted driving: https://news.leavitt.com/publications/top-ten-distracted-driving-points/
- Take steps to protect your home from water damage: https://news.leavitt.com/newsletters/personal/protecting-home-water-damage/
- Maintain defensible space around your home to avoid damages from wildfires: https://news.leavitt.com/newsletters/personal/understanding-wildfire-risk-factors-protecting-home/
Following these recommendations will help ensure you have the right protection at a price you can afford. For more information, please contact your Leavitt Group insurance advisor.