Saving on Insurance

Insurance is a funny concept. You pay for something you hope you’ll never use to replace things you already have.

Insurance is a funny concept. You pay for something you hope you’ll never use to replace things you already have. In some instances such as for automobiles, most states require that drivers have insurance. But these days you can buy insurance for everything from your home computer to vacations. The key is to know what to insure and how much to spend. Here are tips to help you navigate the insurance maze:

Question yourself. Before buying, ask yourself these questions: Am I insuring this out of fear or necessity? What is the replacement value? Is the cost of insurance greater than the value? Your answers will bring you back to the purpose of insurance, which is to pay for something you cannot afford to replace otherwise, and keep you from paying for anything else.

Shop around. Review information offered by your state’s insurance division, then call around to several companies for their rates. Each time you get a premium notice, contact at least two other insurance companies to ask for competitive quotes.

Get discounts. Ask your insurance agent about discounts. Most policies give discounts for safety features such as anti-lock brakes and air bags in cars, and alarm systems and smoke detectors for homes and apartments. Some insurance companies offer discounts for nonsmokers, good drivers and even non-drinkers. If you park your vehicle in a closed garage instead of a carport or driveway, or drive a limited number of miles, you also might qualify for a discount.

Raise deductibles. A higher deductible leads to a lower premium. Keep in mind that the purpose of insurance is to make sure you have coverage for a disaster. A fender bender to your car or a broken gutter on your home can be paid out of pocket.

Reduce claims. Make a claim only when the cost/damage is substantial. Minor repairs should come out of your emergency fund. Insurers are notorious for increasing premiums for people who cash in on low-cost claims.

Don’t over-insure. Drop collision or comprehensive coverage on older cars. Determine how much your car is worth using the Kelly Blue Book. If it’s less than $1,000, you may end up paying more for the extra coverage than you could collect on a claim. For life insurance, only insure for the amount needed to replace the income of the one being insured.

Avoid insurance coupled with investments. Several life insurance products mingle insurance with investments (that develop a cash value). Usually, these are expensive insurance policies and not strong investment performers. It’s better to buy term life insurance and invest your extra money elsewhere.

Don’t forget disability insurance. Statistically, you are more likely to become disabled than to die during your working years. Yet many Americans only consider life insurance. Be sure you have a solid disability policy in place, especially for the primary breadwinner in your household.

Buy smart. Purchase a car with a good repair record and low theft rate. Insurance generally will be less expensive. Also buy reliable brands of electronics and appliances and forego the extra insurance at the register.

Check the price. After you receive the insurance policy you purchased, double-check to ensure you’re getting the price you were quoted.

Combine policies. If you own a home, consider a combined premium option, in which the same company insures both your home and your car. You typically can reduce your premium costs by 10 percent.

Pay annually. Pay your premiums once a year rather than quarterly. That way you pay fewer “service fees."

John Nardini is a frequent contributor to American Profile.

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