Save money on insurance with these 13 strategies for how to decrease insurance premiums and open up extra cash in your life! We routinely do this.
Insurance is one of those necessary expenses in our lives. It might not be a fun expense, but when you are able to make a claim instead of gouging your savings account — or worse, going into debt — than it suddenly becomes clear why almost everyone carries some kind of insurance.
While insurance gives peace of mind, you should still attempt to get the most amount of coverage for the lowest amount of cost.
In fact, several years ago I sat down and added up all of our insurance policies, and the amount we were paying in premiums was startling: 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 (we had bought a policy during hurricane season – a big no-no!)|
|Long term disability||$10.16||$21.45|
|Short term disability||N/A||$8.89|
Have you ever sat down to add up all of your insurance policies together? Would that scare you to see?
The good news is that since I've been doing insurance policy audits for years, I'm practically a PRO at finding ways to decrease insurance premiums.
In fact, I've got 13 actionable strategies I'd like to share with you below that are TESTED and have reaped me SAVINGS over the years — they really work!
Pssst: Each year, or every six months, go through what I call an “insurance audit”. Take each of your policies and see how much they've increased (or if they decreased). Call up the companies where you see increases, and use the tips below to negotiate and find lower rates. This is a great strategy to use for how to save money on a routine basis.
Save on Car Insurance – What You Need to Know
I've got over top 10 ways to save money on car insurance you'll definitely want to try the next time you're shopping for car insurance.
But before we get into these, something you need to know is — if you own a sizable asset, like a home, then you do NOT want to decrease your car insurance coverage just to save money. See the section “How to Save on Home and Auto Insurance – Your Car and Home are Linked (not always in good ways)” for why.
Auto insurance tricks to get a lower quote:
- Call Your Insurance Rep from the Car Lot: Purchase your car with insurance in mind. Cars that are made in Japan and America are cheaper to insure because the car parts are easier to find. Cars that are made in Europe will be more expensive to insure because their parts are sparse and are made overseas. In fact, I've even called our insurance rep from the car lot to ask about how much it will cost to insure a car we're only thinking about buying.
- Submit All Driver Training Certificates (even from Speeding Tickets): Always submit any driver's training you receive, even if it was because of a speeding ticket. My husband got a speeding ticket, and we opted for him to take a driver's class to reduce the fine. I still submitted his certificate to our auto insurance company, and they actually gave us a discount for it! Also, I used to have to drive for the state of Texas, and so they forced us to take a driver's course every three years. Turns out, that certificate brought my premiums down by 18% once I submitted it!
- Don't File a Claim for Each Fender Bender: Figure out if it is worth filing a small claim for things like fender benders and windshields. Look at your deductible that you will have to pay as well as add in the 10-15% your policy will increase after filing a claim (there is typically a 10-15% discount for claim-free histories); over the long haul it could be worth it to shell out the $500 yourself instead of filing a claim.
- Work on Increasing Your Credit Score: If your credit score takes any kind of dip, you could see a premium increase. Even if you renew with your same insurance company, each year they do a soft pull on your credit to reevaluate your premium
- Get Rid of Your Second Car: Did you know that my husband and I lost two cars in flooding 1.5 years ago? We took the insurance money, and put it all down on one car that was better and lower-mileaged than anything we've ever owned. This means we're a one-car family. I've been dropping Paul off to work with our little guy each morning, and picking him up again in the evenings (which works well for us because he works in a nightmarish area with $12/day parking expenses and has to take a bus in, adding 1.5 hours onto his day). Guess how much we save in insurance premiums each month from this? About $60!
- Go without Collision Coverage on Old Cars: I was recently in a car accident, and the fault was my own. While I only had liability insurance and no collision (I have not carried collision insurance for ten years), I was glad that I made this choice even after paying the bill to repair my car. Since I have an emergency fund and essentially have self-insured enough to not have collision insurance, I have saved on the premium for many years. The cost of repair was small compared with the premiums I would have paid (around $1,000). Even if I had the collision insurance, I would have needed to pay a deductible, which would have wiped out most of the benefit. This is not going to work for everyone, and of course if my car were totaled it would have cost much more. But this option paid off for us because I drive around beater cars.
- Ensure Your Car Insurance Policy Covers You for Rentals: You can confidently decline the rental insurance at the car rental counter if you know that your car insurance company will cover you. This could save a decent sum of money over time, especially if you travel a lot. Another tip? Some credit cards now offer rental car protections as well, so you don't need to get the rental car insurance necessarily.
The list doesn't end here — below you'll find more tips that will work to save you money on ANY type of insurance, including car insurance.
Tips for Saving Money on Insurance (Will Work on All Types)
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.
Tip #1: Shop Around Every 6 Months
Wait, wait — don't skip over this section.
Everyone says to shop around, and I understand how it's a pretty boring tip. But the reason why everyone says this? Is because it's completely true. And I'm going to share with you the WHY behind it.
The reason why you need to shop around for your insurance needs as often as every six months is because of how the insurance industry works.
Each insurance company can offer you a different price after about six months than what they offered you before because their prices are based on their current “pool” of insurance subscribers.
And since people are constantly changing insurance policies and companies, this means that a company's pool of insured customers gets renewed as well. Sometimes, their risk gets higher and you will get quoted a higher price. Sometimes, their pool of people is younger and healthier or less risky, and so your quote will be better.
Each company has a pool that is unique to them, and their price for you is based on their experience only. This is why one company may come in significantly lower than another.
These are must-reads:
Tip #2: Cut Out Policy 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!)
Tip #3: Buy Your Insurance Policies in Bulk and Out of Season
Buying your insurance policies in bulk may sound weird, but it’s the same concept of buying buying food in bulk to save money: 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!).
Hint: one instance where you don't want to do this? Is for your adult child's renter's insurance. If you tie your child's renter's policy with your home mortgage, the deductible will be much higher because it is tied to your mortgage than if they had their own cheap renter’s policy. The difference in deductible could be $2500 versus $250, and it's likely that your child’s belongings are not worth the higher deductible. I sure as heck didn't have belongings worth $2,500 in my first apartment!
Another tip is to shop around for insurance OUT of season. What does “out of season” mean? Well, out of the season that gets the most insurance claims for your area. For us in Houston, this means you never want to buy an insurance policy (or any kid) during hurricane season (from June until November). The cost will be higher, no matter what. But February? Well, that might be a great time to buy.
Tip #4: 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:
Raising my deductible amount to $1,500 that I'd have to pay in the event of an accident means I'll save 18% on my monthly insurance premiums.
Definitely a great move if:
A): I set aside at least $1,500 in a savings account and “insure” myself for the deductible amount
B): I'm a decent driver
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? THAT is something you'll need to work out with your insurance rep. However, once you figure out what will let you sleep at night, and what makes financial sense, you can use the 27 strategies from above to get the price down considerably.
Psst: did you know that raising your deductible on your health insurance plan can also decrease your insurance premiums? Check out how to save money on health insurance premiums for more tips and strategies.
Tip #5: Ensure Your Policies are Accurate Representations
Did you know that policies can have inaccurate information on them that are costing you extra money? I would know, because I found a mistake on ours!
Our homeowner’s insurance company had added an extra 100 square feet to our home on the homeowner’s policy. I was able to prove this to them by showing a recent home survey, and so we were given a savings of about $50/year with the updated information!
How to Save on Home and Auto Insurance – Your Car and Home are Linked (not always in good ways)
Sometimes I still find myself in the ole’ college mentality when my possessions were few and far between: I owned a car, textbooks, and some linens. Now I own a home, which I would not have thought needed to be addressed in my semi-annual conversations with my car insurance agent.
But I was dead-wrong.
NOTE: if you have a car and own a home, then you have increased your liability. Let me explain with the help of Adam, from InsurTexas.
Adam explained to me this nightmare scenario:
Let’s say you own a home and your car insurance has property damage coverage for $25,000 or below. Unfortunately, you get into an accident which is your fault. The other driver files a claim with your insurance agent, who gives them the maximum he/she can: $25,000. Except there is just one problem: it is Houston, and the guy was driving a $35,000 car. The victim now goes to his own insurance company and files a claim for the remaining $10,000 he is out to fix or replace his car. What happens next? The victim’s insurance company is going to want to recoup their $10,000, so they come after you. While your primary residence in Texas is protected through a homestead exemption, the equity in your home is not protected. The victim’s insurance company can place a lien on your home so that when you sell it, they recoup their costs before you get a check from the bank. If you never move from your home, they may even be able to garnish your wages in order to get their money back.
In other words, before I owned a home, I had no assets. Now I have an asset with which a person can sue me for in order to recoup their expenses because of my deficient car insurance policy. I better get on that…
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?
Amanda L Grossman
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Tuesday 23rd of April 2019
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My University Money
Tuesday 15th of November 2011
I've been lucky as far as insurance goes to work in Manitoba, Canada as a teacher. We automatically grab some hardcore insurance thanks to your union.
As far as investments go, why the mutual funds? My parents went this route as well, and index funds just make so much more sense if you're not into picking individual stocks.
Amanda L Grossman
Wednesday 16th of November 2011
Okay... am not investment savvy, but you made me look to see what I have (so thanks for asking!). Here is the fund: Vanguard Target Retirement 2045 Fund
It is outside of a retirement account, but uses the same buying procedure (90% stocks, etc.). Is this a mutual fund, or something else?
Thanks for the help?
Monday 14th of November 2011
My wife and I have three little ones and had never considered extra life insurance before the first one was born. Initially we had $1mil policy on me and $750k on her. I work and she is a stay-at-home right now. This seemed to go along with most advisers' recommendations but as our brood has grown so has our monthly financial output. We had to drop back a little bit on each of the policies (-$250k each) but we feel that if one of us (or both) were to die the money would be sufficient to maintain current lifestyles.
Monday 14th of November 2011
Thank you for sharing your own experience--I'll bet kids change everything, especially the way you think.
Thursday 10th of November 2011
I have no car, so no car insurance but there is about $15k in whole life coverage that I got years ago. It'll put me in ground and pay what needs to be paid off.
With insurance you either accept it or hate it. Get the extra coverage now while you're healthy and it's cheap. Lose your job and the insurance is gone too.
Thursday 10th of November 2011
I carry $50K and my husband $100K in life insurance. With that, we could each get by should the other pass, but when we have kids, we may look into purchasing more.
Thursday 10th of November 2011
I think kids are key to adding more onto the insurance policy, at least in our situation.