While fine-tuning our budget the other day—an activity I admittedly love to do—I had a small realization. I base our budget off of our net pay, or the amount that Paul and I take home after all deductions have been made, which is a logical way to do it. But what about looking into our deductions to see if we could fine-tune some of these? This thinking led me to the great topic of insurance.
How much insurance is too much? Would $100,000 in life insurance, $300,000 in home insurance, and $5,000 in pet insurance keep me from fearing that big bad monster shadowing over my tomorrow? I added up all of our insurance policies, and the number was staggering: close to $600 of our money each month goes towards paying off future misfortune and accidents. That is over $7,000.00 per year! Here is the monthly breakdown:
|Type of Insurance||Paul||Amanda|
|Health Insurance (includes Dental and Vision)||$175.18||$8.52|
|Home Insurance||$208 (due to buying during hurricane season; we will be getting a much lower rate soon)|
|Long term disability||$10.16||$21.45|
|Short term disability||N/A||$8.89|
In my research for this article, I found that there are several ways that we could potentially cut our costs. I will address each below, as well as our cost savings. However, insurance needs to be built upon your own needs, so you may be able to use some of this advice, but not all of it.
Cut Out Duplications
When I first began my job with the state as an environmental investigator, signing up for long-term and short-term disability insurance made good sense to me. And both of these insurances still do make sense; my job could potentially expose me to chemical pollutants, particulate matter that could get lodged in my lungs, I could have an accident on an oil refinery, etc. But aren’t long term disability and short-term disability covered somewhere else?
If I am disabled, Social Security pays disability after five full months of being disabled. The payments can last until I retire, at which point my Social Security retirement benefits will kick in. Using this disability calculator, it turns out I would receive approximately $1,350 per month on disability with the US government. Under my current plan, my short-term disability will pay $2,021 and my long-term disability will pay approximately $1,837 per month. After learning this, it just does not make sense for me to continue paying $30.34 per month ($364 per year) for an extra $487 per month should I become disabled. I am the type of person who always has extra savings, I invest, and I have a healthy retirement for my age, so there are always back-ups available to me in case I cannot live off of that $1,350 per month. Unfortunately, I cannot opt out of this until the beginning of our next fiscal year…September 2010. But this would be a $30 savings to me and a $40 savings if we chose to take Paul off of his disability insurance (which I think we will).
Another possible duplicate was pointed out by my friend Aurora; instead of purchasing insurance for my engagement ring (which most jewelers will push), turns out that your home insurance policy will cover jewelry (up to a certain amount—you need to check and make sure the full value of your ring or other jewelry will be covered). This was a great savings to me! (Thanks Aurora!)
Buy in Bulk
It’s the same concept you find with buying food in bulk: if you purchase several policies from the same company, you most likely will receive a discount. For instance, when I used to rent an apartment, my auto insurance company sold me renter’s insurance that gave me a 10% off of my auto policy (which I would have bought both anyway, so this was a savings to me). Homeowner’s insurance policies can offer up to a 30% discount on your car insurance (once again, we need both, so getting a discount saves us money!).
Insure Yourself with a Savings Account
I am not condoning getting rid of insurance all together, but you could certainly raise your deductibles if you have a comfortable cushion in your savings accounts. This would lower your premiums each month, but still leave you peace of mind that you could cover a large expense if needed. To give you an idea of the savings you could see, here is the cost savings from raising a comprehensive and collision deductible on a quote from Nationwide for my (now deceased) used Chevy cavalier:
As you can see, there are ways that you can lower your insurance costs. How much are you currently paying in insurance? Do you see any ways to cut back, or have you had success with cutting back on your insurance policies?