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Author: Chemain Evans Article source: http://www.articlealley.com/. Used with author's permission.
Did you know that you could be overpaying for your insurance
by as much as hundreds of dollars? Most of us have a hard time
getting excited about shopping for different insurance, but a
little time invested can go a long way in saving you money. Of
course, the cost of premiums isn't the be-all-end-all; quality of
service, quick response to claims, and financial soundness are
all important factors to consider. However, the focus of this
article is on getting and keeping those automobile,
homeowner/renter, and life insurance premiums down. First
we'll discuss some generalities; then we'll get down to some
specifics for each category.
Shop around. Shopping around for insurance will take some
time, but could save you a good sum of money. Ask your friends,
check the Yellow Pages or call your state insurance department.
You can also access insurance information for your state on the
Internet at
http://www.naic.org/state_contacts/sid_websites.htm. States
often make information available on typical rates charged by
major insurers and many states provide the frequency of
consumer complaints by company. Also check consumer guides,
insurance agents, companies and online insurance quote
services.
This will give you an idea of price ranges and tell you which
companies have the lowest prices. But don't consider price
alone. The insurer you select should offer a fair price and deliver
the quality service you would expect if you needed assistance in
filing a claim. So talk to a number of insurers to get a feeling for
the type of service they give. Ask them what they would do to
lower your costs. Check the financial ratings of the companies
with AM Best or Standard and Poor's.
Compare against your current policy. When comparing
companies, have your current policy handy when calling so you
can compare apples to apples. And if you do find a better policy,
absolutely make certain that your new policy is in effect before
dropping your old one.
Use a licensed, low-price insurer. You can save several hundred
dollars a year on homeowner or auto insurance and up to $50 a
year on renter insurance by purchasing from a licensed, low-
price insurer. Call your state insurance department for a
publication showing typical prices charged by different
companies. Then call at least four of the lowest-priced, licensed
insurers to learn what they would charge you for the same
coverage. If such a publication is not available, it is even more
important to call at least four insurers for price quotes.
Use the same insurer for multiple policies. Whenever possible,
buy your home and auto policies from the same insurer. Some
companies that sell homeowners, auto and liability coverage will
take 5 to 15 percent off your premium if you buy two or more
policies from them. But make certain this combined price is lower
than buying the different coverages from different companies.
Stay with the same insurer. If you've kept your coverage with a
company for several years, you may receive a special discount
for being a long-term policyholder. This is why it is important to
compare against your current policy. Some insurers will reduce
their premiums by 5 percent if you stay with them for three to
five years and by 10 percent if you remain a policyholder for six
years or more. Check to ensure that you are getting the
"renewal" discount. But make certain to periodically compare
this price with that of other policies.
Look into group coverage. If your employer administers a group
insurance program, check to see if a homeowners or auto policy
is available and whether it is a better deal than you can find
elsewhere. In addition, professional, alumni and business
groups often work out an insurance package with an insurance
company, which includes a discount for association members.
Ask your association's director if an insurer is offering a discount
on homeowners or auto insurance to you and your fellow
graduates or colleagues. If you are a member of an auto club,
such as an affiliation AAA, check with that organization as well.
With those general rules out of the way, let's move on to some
specifics.
Auto Insurance
Get your discounts. Make sure you get all the discounts you may
qualify for. Check on discounts for safety and security features.
Safety features can also lower your payments. Heading the list
of money saving safety features is antilock brakes. Check to see
if the insurance company you have or are considering gives a
discount for this feature. Automatic seatbelts and airbags may
also give you premium discounts.
Stay clean. Keep your driver's record clean; avoid tickets,
especially moving violations. Drive a car that is less popular with
thieves, inexpensive to repair, and/or an older model. When
shopping for a new car, check with your insurer about insurance
costs as well.
Raise your deductible. Talk to your agent or insurer about
raising your deductibles on collision and comprehensive
coverages to $500 or more. Deductibles are the amount of
money you have to pay toward a loss before your insurance
company starts to pay a claim, according to the terms of your
policy. The higher your deductible, the more money you can
save on your premiums. If you have an old car consider
dropping these coverages altogether. Taking these steps can
save you hundreds of dollars a year.
Check for a low-risk occupation discount. Insurance companies
collect information about what types of people get into
accidents. Over the years they have seen trends that show that
drivers in certain occupations tend to get into fewer accidents.
These occupations are then labeled "low-risk". Since, on
average, drivers in these occupations have a lower chance of
getting into an accident, insurance rates for them are lower.
Check with your insurance company or agent if you are in a low-
risk occupation.
Homeowner/Renter Insurance
Raise your deductible. Nowadays, most insurance companies
recommend a deductible of at least $500. If you can afford to
raise your deductible to $1,000, you may save as much as 25
percent. Remember, if you live in a disaster-prone area, your
insurance policy may have a separate deductible for certain
kinds of damage. If you live near the coast in the East, you may
have a separate windstorm deductible; if you live in a state
vulnerable to hail storms, you may have a separate deductible
for hail; and if you live in an earthquake-prone area, your
earthquake policy has a deductible.
Make your home more disaster resistant. Find out from your
insurance agent or company representative what steps you can
take to make your home more resistant to windstorms and
other natural disasters. You may be able to save on your
premiums by adding storm shutters, reinforcing your roof, or
buying stronger roofing materials. Older homes can be
retrofitted to make them better able to withstand earthquakes.
In addition, consider modernizing your heating, plumbing and
electrical systems to reduce the risk of fire and water damage.
Get the right amount of coverage. Make certain you purchase
enough coverage to replace the house and its contents.
"Replacement" on the house means rebuilding to its current
condition. Don't confuse what you paid for your house with
rebuilding costs. The land under your house isn't at risk from
theft, windstorm, fire and the other perils covered in your
homeowners policy. So don't include its value in deciding how
much homeowners insurance to buy. If you do, you will pay a
higher premium than you should.
Improve your home security. You can usually get discounts of at
least 5 percent for a smoke detector, burglar alarm or dead-bolt
locks. Some companies offer to cut your premium by as much as
15 or 20 percent if you install a sophisticated sprinkler system
and a fire and burglar alarm that rings at the police, fire or other
monitoring stations. These systems aren't cheap and not every
system qualifies for a discount. Before you buy such a system,
find out what kind your insurer recommends, how much the
device would cost and how much you would save on premiums.
Seek out other discounts. Companies offer several types of
discounts, but they don't all offer the same discount or the same
amount of discount in all states. That's why you should ask your
agent or company representative about any discounts available
to you. For example, since retired people stay at home more
than working people, they are less likely to be burglarized and
may spot fires sooner. Retired people also have more time for
maintaining their homes. If you're at least 55 years old and
retired, you may qualify for a discount of up to 10 percent at
some companies.
Review annually. Review the limits in your policy and the value
of your possessions at least once a year. You want your policy
to cover any major purchases or additions to your home. But
you don't want to spend money for coverage you don't need. If
your five-year-old fur coat is no longer worth the $5,000 you
paid for it, you'll want to reduce or cancel your floater (extra
insurance for items whose full value is not covered by standard
homeowners policies) and pocket the difference.
Look for private insurance if you are in a government plan. If
you live in a high-risk area -- say, one that is especially
vulnerable to coastal storms, fires, or crime -- and have been
buying your homeowners insurance through a government plan,
you should check with an insurance agent or company
representative or contact your state department of insurance
for the names of companies that might be interested in your
business. You may find that there are steps you can take that
would allow you to buy insurance at a lower price in the private
market.
Buyer beware. When you're buying a home, consider the cost of
homeowners insurance. You may pay less for insurance if you
buy a house close to a fire hydrant or in a community that has a
professional rather than a volunteer fire department. It may
also be cheaper if your home's electrical, heating and plumbing
systems are less than 10 years old. If you live in the East,
consider a brick home because it's more wind resistant. If you
live in an earthquake-prone area, look for a wooden frame
house because it is more likely to withstand this type of
disaster.
Choosing wisely could cut your premiums by 5 to 15 percent.
Remember that flood insurance and earthquake damage are not
covered by a standard homeowners policy. If you buy a house in
a flood-prone area, you'll have to pay for a flood insurance
policy that costs an average of $400 a year. The Federal
Emergency Management Agency provides useful information on
flood insurance on its Web site at http://www.fema.gov/. A
separate earthquake policy is available from most insurance
companies. The cost of the coverage will depend on the
likelihood of earthquakes in your area.
Ask questions. If you have questions about insurance for any of
your possessions, be sure to ask your agent or company
representative when you're shopping around for a policy. For
example, if you run a business out of your home, be sure to
discuss coverage for that business. Most homeowners policies
cover business equipment in the home, but only up to $2,500
and they offer no business liability insurance. Although you want
to lower your homeowners insurance cost, you also want to
make certain you have all the coverage you need.
Life Insurance
The main purpose of life insurance is to replace your income for
your family if something should happen to you. If you are single,
you probably don't need life insurance. If your kids raised and
you have planned well for retirement, you probably don't need
life insurance. Anyone with children still at home should carry life
insurance, unless an alternative plan is in place.
For savings, choose term insurance. If you want insurance
protection only, and not a savings and investment product, buy
a term life insurance policy. You will probably be quite surprised
at how reasonable it is. There are several companies that can
"shop" the rates for you and help you narrow down the field.
Select the longest term you can afford and make sure the rates
are set for the entire term.
For investment, choose other insurance. If you want to buy a
whole life, universal life, or other cash value policy, plan to hold
it for at least 15 years. It is, after all, an investment. Canceling
these policies after only a few years can more than double your
life insurance costs.
Check your public library for information about the financial
soundness of insurance companies and the prices they charge.
The July 1998 issue of Consumer Reports is a valuable source of
information about a number of insurers.
Chemain Evans is a quality control specialist for Simple Joe, Inc. Income & Expenses PC software is a Simple Joe product that is a quick and simple way to keep track of your expenses and stay within your budget. Learn more at http://www.simplejoe.com
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