12 Ways to Save on Insurance

Insurance is a funny thing. You’re paying for something you hope you’ll never use to replace things you already have. In some cases, insurance is required. But these days you can buy insurance for everything from autos to vacations. How do you know what to insure and how much to spend? Here are 12 tips to help you get the coverage you need without spending a fortune:

* Question yourself. Before buying insurance, ask yourself the following questions: Why 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, 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. Every 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, for example anti-lock brakes and air bags in cars and alarm systems and smoke detectors for homes/apartments. Some insurance companies offer discounts for nonsmokers, good drivers – 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 might qualify for a discount.

* Raise deductibles. A higher deductible leads to a lower premium. Keep in mind, the purpose for insurance is to make sure you have coverage for a disaster. Fender benders on your car or slight damage to your house can be paid out-of-pocket.

* Reduce claims. Only make a claim when the cost/damage is substantial. Minor repairs should be funded out of your emergency fund. Insurers are notorious for increasing the premiums of those who have cashed in on even low cost claims come renewal time.

* Don’t overinsure. 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 one thousand dollars, you may end up paying more for coverage than you would be able to collect on a claim. For life insurance, only insure for the amount needed to replace the income of the one being insured – not so the family of the deceased becomes suddenly wealthy.

* Avoid insurance coupled with investments. There are several life insurance products that mingle insurance and investments (they develop a cash value). Usually, these are very expensive insurance policies and not as good of performers as other options. It’s better to buy term life insurance and invest your extra money elsewhere.

* Don’t forget disability insurance. It’s much more likely that you’ll be disabled than it is that you’ll 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 bread winner in your household.

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

* Check the price. Double check your insurance policy after you receive it and make sure you’re getting the price you were quoted.

* Combine policies. If you own a home, consider a combined premium option, where you get insurance on both the home and your cars from the same insurance company. You can typically reduce your premium costs by 10 percent or so by simply having both policies with the same insurer.

* Pay annually. Pay your premiums once a year, rather than quarterly. That way you avoid the typical $5 to $10 “service fee” you get stuck paying each time you send in a payment every few months.

Use these tips to spend only what you have to on insurance. Keep in mind the purpose of insurance, for protection rather than provision, and you’ll be sure that every cent you spend on insurance is well worth the cost.