Those who fail to plan, plan to fail. And like it or not, planning for the unexpected by being properly insured is a big part of being financially responsible. That’s because people who try to save a few bucks by not buying insurance can quickly end up in severe financial distress if bad luck befalls them.
The trouble is, for a lot of folks, buying insurance can be a complicated endeavor. After all, choosing the right deductibles and coverage options are not intuitive processes, so there are plenty of opportunities for even the savviest consumers to get confused when it comes time to finally buy coverage. Heck, even I still do on occasion.
With that in mind, here are 18 tips to consider the next time you find yourself shopping for auto, home or life insurance:
Auto Insurance Tips
Auto insurance guards against expensive repair, medical and liability costs that can result from major accidents. Trivia time: Did you know some form of it is required to legally drive in every state but New Hampshire?
- Consider dropping your collision and comprehensive coverage. Well, that is, assuming your car is either paid for or at least six years old. Otherwise, you may end up with less money than it takes to replace your car because insurance companies generally pay the depreciated value of most older cars.
- Raise your deductible. If you want collision and comprehensive, one way to take the sting out of the fees of a full coverage auto insurance policy is to raise your deductible as high as you feel comfortable. Just be prepared to pay that amount if you cause an accident or your car is stolen, vandalized or damaged by natural causes.
- Purchase uninsured motorist coverage. One in seven US drivers currently carry no insurance at all. For that reason alone, you should keep uninsured motorist coverage similar to your primary policy’s liability limit.
- Don’t buy your teenagers a new car. It’s true; insurers assume teens will drive less when they don’t have their own wheels.
- Shop around. With all the tools available online today, there’s no reason not to shop around. Use an auto insurance comparison engine like TheZebra to compare car insurance policies from multiple companies in seconds. Comparison shopping is the only way to truly ensure you’re getting the best deal.
Life Insurance Tips
Life insurance protects your family by providing for your dependents in case you die prematurely.
- Ensure you really need it. If you don’t have dependents, you probably don’t need life insurance.
- Don’t buy life insurance for a period longer than you have to. Life insurance is important when you are younger and have a family that depends on your income. For most folks, that means it’s only necessary until their youngest child has left the nest, although some may prefer to keep it until their last child has graduated from college.
- Consider buying term life insurance. A term life policy is the most cost effective way to cover your dependents if you die unexpectedly. On the other hand, whole life insurance is expensive because you’re paying for insurance plus the overhead that comes with the added investment component.
- If possible, buy your life insurance when you’re young. Term life insurance premiums are ridiculously cheap for folks under 40. However, once you reach 50, premiums begin to increase substantially. I bought a 30-year $500,000 term life policy when I was in my twenties, and the low annual premium has remained the same since the day I bought it.
- If you do need it, buy your life insurance from a reputable company. Make sure you only buy from a reputable insurance company that is financially sound. You can verify insurance companies via major insurance rating agencies such as Moody’s or Fitch.
Homeowners Insurance Tips
Homeowner policies shield you from losses due to theft, and fire or other damage to your home or personal property; it also provides accident liability coverage.
- Ensure you’re getting all the homeowner discounts you’re entitled to. In addition to senior discounts, many insurance companies offer homeowner policy reductions for deadbolts, fire extinguishers, sprinkler systems, smoke alarms and security systems that report to a central station.
- Raise your credit score. Believe it or not, because it is an indicator of personal responsibility, many insurance companies are now giving lower rates to homeowners with good credit histories.
- Keep your home well-maintained. For example, updating aging electrical and heating systems as needed can reduce the risk of fire. And following building codes when remodeling bathrooms and kitchens can reduce the risk of water damage and other plumbing related problems.
General Insurance Tips
- Comparison shop. Identical risks are often priced differently from insurer to insurer, so always shop around — thankfully, Internet shopping is relatively painless.
- Know what you’re buying. If you don’t understand certain benefits, terms, or conditions, always ask your insurance agent to explain them to you.
- Occasionally reevaluate your insurance needs. Review your insurance annually. Life-changing events such as the birth of a new child, divorce, retirement and income reductions usually call for coverage updates or additions.
- If you’ve got a lot of assets, consider getting an umbrella policy. An umbrella policy covers you beyond traditional policy liability limits.
- Reevaluate your low deductibles. Folks rarely make claims under $1000 because they’re rightly afraid it will raise their rates — so why pay a premium for lower deductibles if you aren’t going to take advantage of them?
- Ensure you’re taking advantage of every available insurance discount. In addition to the homeowner deals previously mentioned, many insurance companies offer discounts for safe driving discounts, being a good student, working “low-risk” occupations, and being a loyal customer.
- Combine coverage. Bundling two policies from the same customer can often result in insurers chopping premiums by as much as 20%.
Although everyone prays they’ll never have to use it, buying insurance is something that we all have to do as responsible adults. Hopefully these tips will make that task a lot easier and, more importantly, help ensure you’re properly covered if you ever do have to file a claim.
Photo Credit: David Hilowitz