All insurance works in the same way: you pay a premium (a fixed amount of money) to the insurance company, usually in some type of program (monthly or annual, for example). In return, the company issues an insurance policy, which is a contract that provides certain coverage or financial protection. When you suffer an insured loss, file a claim and the company pays you a benefit.
Consider the purpose and define your goal
The insurance is intended to protect you from catastrophes, not from everyday annoyances. Use insurance to protect yourself from things that are not likely to happen, but that would cause financial difficulties if they occurred.
Your goal should be to have the right amount of insurance. If you have too much, you are wasting money.
For example, if you have a $ 50 deductible on your car insurance, you will probably end up paying the insurance company much more in premiums than they will pay you for benefits. Or, if you are young, single and have tons of credit card debt, life insurance is not a good place to deposit your cash.
On the other hand, if you are a small business owner of 40 years and a father of five, temporary life insurance could be an excellent way to protect yourself against the risk of your dying tomorrow. Or, if you’re a millionaire who likes to drive fast, raising the limits of your car’s liability coverage could save you a fortune if you are sued for the damage it causes when you sink into the back of a school bus.
How to save on insurance
The first thing you can do to save money on insurance is to self-insure as much as possible. That is, reserve your own money to cover minor and moderate catastrophes, if possible.
To do this, try increasing deductibles on your auto and home insurance policies. Then, take the difference between your old premiums and your new premiums every month and put it in an online savings account you designate as “self-insurance.” It will not take you long to have more than enough to cover the deductible.
You can also save money on insurance by reviewing your coverage from time to time.
To do this, follow these suggestions:
- Read their policy. As with all legal contracts, it is important that you read your policy so that you know what is covered and what is not. Pay attention to policy changes that arrive by mail. If you have any questions, ask. And make it a habit to review your policies from time to time to make sure you understand them (and see if anything has changed).
- Do not duplicate coverage. Know what policies provide what benefits. If you have an AAA membership, for example, you do not need tow coverage in your car insurance. And if your credit card doubles the guarantees on the things you buy, do not pay for extended warranties. I try to review my policies once a year to remind me of my coverage. (I’m a forgetful guy!) I recommend you do the same.
- Consolidate. Get all your insurance from a provider. Insurance companies often give a discount if you have multiple policies with them. In addition, this saves you the hassle of having to pay more than one company.
- Present fewer claims. Do not make a dime to your insurance company. If you file claims for every little thing, your rates will increase. The insurance is intended to cover large unexpected losses, not all the obstacles that your car gets from shopping carts.
- Shopping around. To find better rates, take advantage of the power of the web. Visit the National Association of Insurance Commissioners and click on the “states and jurisdictions” link to find the insurance department of your state. From there, you can find information about your state’s insurance laws and, in some cases, get quotes. You can also get quotes from multiple insurance companies at sites like insurance.com, insweb.com, insure.com and even our insurance page at Get Rich Slowly.
- Buy only what you need. Insurance agents are happy to sell you more coverage than your situation requires. Do some research before buying. Find out how much and what type of insurance you need, and do not let the agent convince you more.
- Increase your deductible. The deductible is the amount you pay for a loss before the insurance company returns the money. For example, if your car receives $ 400 damage because it drives over a curb and has a $ 250 deductible, it pays the first $ 250 and your insurance company pays the rest. It is up to you to set the deductible, but the lower your insurance deductible, the higher your premiums will be. Ask yourself how much you can pay if something goes wrong; more specifically, how much is too much? Set your deductible just below “too much”.
- Take care of the things you insure. One of the best forms of insurance is routine maintenance. A well-maintained automobile is less likely to have an accident due to mechanical failure. If you take care of your house, it will resist the ravages of time. And if you exercise and eat well, you will get cheaper health and life insurance.
Tip: To increase the chances of a satisfactory agreement when filing a claim, be sure to document your losses well. And it’s perfectly acceptable, well even! – negotiate if you believe that the liquidation offer of the insurance company is not fair (and your first offer is almost never fair). Be persistent
These tips help you save on most types of insurance. Still, not all insurance advice can be generalized; Each type of insurance has its peculiarities.
Next week, we will look at specific ways to save on the most common type of insurance: car insurance.