Insurance is an important tool that helps protect us from a number of risks, such as an unexpected death or disability, or more tangible assets like our homes, cars, and possessions. It is one of those rare things we buy hoping never to need. The myriad of premiums – from homeowners to auto, life, disability, and health – can really weigh on the budget.
So, how can you save money without sacrificing coverage quality? We’ve rounded up some top tips.
#1 Bundle your policies
When you’ve shopped for homeowners, renters, or auto insurance you’ve likely seen the advertisements for bundling discounts. But if you’ve never taken advantage of the offer, you might not know that these discounts can be significant.
Selling multiple policies to one person saves insurance companies quite a bit in processing, sales, and administrative costs. Which means discounts to move you from one policy to two or more can pay off.
In fact, the national average savings is 16 percent (according to insurance quotes.com) for bundling your home and auto insurance needs.
The benefits of bundling do vary by state – and with the variety of policies, you’re combining. In Georgia and Oklahoma, for example, consumers save 22 percent, on average, when bundling home and auto. But in Florida, savings are just 8 percent.
Condo, life, recreational equipment, and renters insurance policies are generally less expensive than homeowners insurance to start. Which means insurance providers have less profit margin with which to offer discounts. This means bundle savings may be lower. The average savings for bundling auto and condo insurance is 11 percent; for renters and auto, 8 percent.
If you need multiple policies, be sure to ask about bundling discounts as well as one-off premiums when shopping for coverage.
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#2 Regularly shop for car insurance
Did you know industry recommendations are to shop for auto insurance every six months? In most states, that is the length of a policy, and shopping around before automatically re-upping coverage can save you money.
Car insurance companies change rates all the time. Even day-to-day, which is why you usually can’t lock in a policy price for more than a week or two before activating the policy. This is driven by changes in their claims, weather patterns, and market rules. The changes are usually small, but over time can add up.
There are also other reasons to compare insurance quotes often. Insurance gets cheaper as you get older (to a point!) and major life changes can also impact your rates. Auto insurance is cheaper for married individuals and for homeowners, so if you’ve recently heard wedding bells or bought a home, it may be time to shop around.
Likewise, a change in usage can trigger a new rate. If you’ve made the jump to working remotely on a regular basis, your annual mileage may need to be adjusted. Lower mileage could mean lower premiums.
Finally, if you have moving violations, be sure to compare quotes after those violations have fallen off your record. In most states, at-fault incidents stay on your record for three years. Shopping around guarantees you get the most accurate quote.
Services like The Zebra can help you quickly and easily compare insurance quotes from over 200 providers, online, for free. So much better than calling a dozen insurance companies on your own and trying to parse through each policy and compare them apples-to-apples.
#3 Revisit your life insurance needs
I bought a 30-year life insurance policy when I was 25. But the coverage I needed then, and today when my kids are small, might not be the amount I need forever. And if I need less coverage before my policy expires, I know I’ll be calling my insurer to ask if I can lower my policy amount and cut my premium, if this feature is available.
If, when you purchased your term life insurance policy, you chose a coverage term to coincide with the length of your mortgage, and you are now at a point where your mortgage is nearly paid and you’ve been diligently saving for retirement, you may no longer need that million-dollar policy. Did you know that some insurance providers, including Haven Life, allow you to lower your policy amount? It doesn’t require re-underwriting the policy, so your increased age isn’t a factor, and the lower coverage amount can reduce your monthly premium.
As you build up assets over your lifetime, revisit how much life insurance coverage you would need if you purchased today. If the amount falls significantly, check in with your insurance company to see if you can reduce your coverage amount.
#4 Ask about special discounts on homeowners insurance
We’ve all heard of good driver discounts for auto insurance, but many homeowners insurance providers offer discounts for good homeowner behavior, too.
While it depends on the provider, you might get discounts for smoke detectors, sprinkler systems (indoor – not the ones keeping your lawn green!), burglar-alarms, and deadbolt locks. Some companies even offer discounts if you don’t allow smoking in your home!
When shopping for quotes, or renewing a policy, ask about special discounts that you may qualify for. And if you are in the military or work in a nursing or teaching profession, be sure to ask about profession discounts as well.
#5 Improve your health
Americans spend more on health insurance than all other insurance policies combined. In 2016, the average family paid $9,996 in health insurance premiums, plus an average deductible of $7,983. While improving your health may not lower your health insurance premiums, it can mean fewer trips to the doctor, less medication, and overall lower spending toward your deductible.
But your health doesn’t just affect your healthcare costs. Life insurance is also impacted by your overall health, including your weight, whether or not you smoke, and metrics like blood pressure and cholesterol. Improving your health – particularly quitting smoking – can allow you to significantly lower your life insurance premiums.
For example, an estimated Haven Term premium for a 35-year-old, smoking man in good health is $106.19 per month for a $600,000, 20-year- Haven Term policy issued by MassMutual. If that same man hasn’t used tobacco or nicotine products for at least 12 months and the exam results are negative, he may qualify for a non-smoker rare class. That would be $35.06 for the same policy — a savings of more than $850 a year.
Many insurers will allow you to retake the medical exam after the first year of your policy. Quitting unhealthy habits and establishing a healthy eating and exercise routine can help you reduce your health and life insurance costs.
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#6 Raise your deductible (and stash it ahead of time)
Your deductible is how much you’re expected to pay before your insurance policy takes over (if your policy includes one). And while you never want to increase your deductible beyond where you could easily pay it if you have an accident, building up an emergency fund so you can raise your deductible can save you quite a bit on premiums.
Research from the Insurance Information Institute (the III) found that increasing your deductible from $200 to $500 could reduce your auto insurance coverage costs by 15% to 30%, depending on where you live. Increasing your policy up to $1,000 can help you save 40% or more.
A $1,000 bill at the time of an accident could be stressful. But the III also found that only 6.1% of auto insurance policyholders filed a collision claim and only 5.9% of homeowners filed a claim in 2016. Saving a $1,000 emergency fund in a high-yield savings account, where it can earn a little interest, can save you hundreds in premiums before you need to file a claim.
#7 Improve your credit standing
Depending on where you live, your credit standing might impact how much you pay for auto, homeowners, and other insurance.
Most car insurance companies use a credit-based insurance score (also called an insurance risk score) to determine your insurability and your rates (unless you live in a state where the practice is banned). This is not the same as your credit score. Your credit-based insurance score has some similarities to your credit score, but the algorithms are different, as are the factors that weigh into the calculation. Insurers use the information in your credit file to predict the likelihood that you will make a claim. The insurer will also consider your zip code, your driving record, and your claims history.
Your credit-based insurance score may also be used by your homeowners insurance issuer in its underwriting process.
Having poor credit history can significantly impact your home and auto insurance premiums. A history of late payments or high debt utilization will probably put you in a higher risk classification if you live in a state where it is legal for insurers to use credit-based insurance scores in their underwriting process. As a result, low credit scores tend to be correlated with high premiums. For example, drivers with poor credit (524 or below), pay more than twice as much as those with excellent credit (823 or more). Those with fair credit, the median for the U.S. with scores ranging from 580 to 669, still pay $543 more on average than those with excellent credit.
The price difference looks similar for homeowners. Those with poor credit pay more than double, on average, than those with excellent credit. And homeowners with fair credit are still paying 36% more.
Diligently make payments on time, reduce your overall debt load, and extend your credit history to improve your credit standing overall and, in turn, lower your insurance premiums. And remember, a missed payment stays on your report for seven years. As you develop better habits and those old mistakes roll off your report, requote your insurance.
You can reduce insurance costs without sacrificing quality
Insurance is an important part of a healthy financial life. But you can make small moves to reduce the cost of this “just in case” expense. Bundling policies, shopping premiums, and making smart financial and health moves can reduce your insurance costs substantially. All while keeping your family protected.
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Chelsea Brennan is the founder of Mama Fish Saves, a personal finance blog that focuses on family finance, investing, and reducing money stress. Chelsea is an ex-hedge fund investor whose work has appeared in a wide array of publications, including Forbes, Business Insider, and more.