Reviewing Insurance Policies Can Save Money
Last week we went into our insurance agent’s office and had a face to face meeting to review our homeowners and auto insurance policies. This can also be done over the phone, but I like to sit down and look at all the numbers on the computer with my agent and make him make 15 different changes one at a time to see what effect each has, separately and combined. I knew that I wanted to make one big change on both our policies (raise the deductible) but I ended up making a few other ones as well, some of which lowered our premium and some which raised it. But the overall result was lower premiums for the coming year. Most of the changes we made were to our auto insurance, and we looked at these factors:
Collision coverage: We had collision coverage on both our vehicles. I am very attached to collision coverage. our agent showed us how they valuate cars, and basically, the 1996 Corolla would end up valued at about $900 (give or take). Removing collision coverage on that car was basically like giving it a $900 deductible, since that was the most they would pay out in damages no matter what happened to the car. So we removed collision on the Corolla.
Deductibles: We had $250 deductibles on both cars. Removing collision on the Corolla eliminated the deductible question altogether, and we raised the deductible on the Saturn to $500. I wanted to go to $1000, but my spouse is more cautious and considering our current financial state, $500 made more sense.
Liability: We actually raised our coverage here - we had a maximum payout of $25000 per person injured if we caused an accident (not us, the other people), and we raised that to $100000. Medical costs keep going up and we don’t want to be liable as much as possible if something were to happen.
Plan options: We actually upped our plan to one that has multiple accident forgiveness (meaning, no rate change if we have an accident) and a deductible reduction. We upped it for the deductible reduction, basically. Every year without an accident, our deductible on the Saturn goes down $100. This plan also has 5% cash back of our premium paid every 6 months. We weren’t planning on doing that at all. The rest was basically preplanned in my head before the meeting, but when we looked at that plan, the difference in premium was about 5% from what we would be paying on our current plan (with the other changes already incorporated) and if we didn’t have accidents, we’d get 5% back each 6 months. Why we decided to go with it was because it reduces our deductible and just in case we have an accident, it protects our premium. One accident would shoot our premium up higher than the overall savings of the other plan.
Overall, we ended up with a $20 per 6 months savings for our auto policies, with a potential of $45 per 6 months savings if we remain accident free.
Then we looked at our homeowners insurance, and simply raised the deductible from $250 to $1000. This saves us about $40 per year. We actually could make our deductible as high as $7500 and plan to someday, but not yet. That is several years of saving away.
Overall, yearly our savings is about $80 between the two policies, with an additional $25 cash back every 6 months if we have no at-fault accidents. So a guaranteed $80 savings with potential of $140 saved per year. Not bad for a fifteen minute meeting.
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January 6th, 2009 at 2:46 pm
It’s amazing the things you think you need, isn’t it? I always thought collision insurance was a must-have. But when we were looking at getting a car, I found out it’s a bad idea for older autos.
My one question would be about your homeowners insurance: You raised your deductible from $250 to $1000. You said this saves you just $40 a year. So, to make that worthwhile, you would have to not be broken into for 19 years. Otherwise, you’re paying out $750 more in deductibles, plus they’ll raise your rates after the break-in.
If it were $40 a month, I could potentially see the benefit. That would mean that once you made it two years without a break-in, you’d more than have recouped the money. And, of course, hopefully you *never* get broken into. But it just seems like an awful large hike in your payout to avoid an awfully small amount.
January 6th, 2009 at 3:21 pm
@Abigail - Since we don’t even pay $40 a month in homeowners ins - that would be a great savings! Our homeowners ins is only ~$300 a year.
I guess its a bet I make with the insurance company - I don’t think I’ll need to use it, so I spend $40 less per year. If I do need to use it, I’ll have to pay a higher deductible and the ins company wins on that front. But it’s a risk I am willing to take. If I have to use it, then I made the wrong bet.
January 6th, 2009 at 3:57 pm
Don’t forget, if you get a “new” car to check and see if you can get coverage for ALL events (including breakdowns). We have AAA and could only get it on our new vehicle. It’s worth it if you can get it. Some policies also give you a break for online safety courses, etc. We would have gotten a break IF we could have talked our teen driver into taking it. We did get a discount because of her good grades. Also we got a break for having a back-up beeper, and [homeowners’] an official alarm system. I’m sure your agent went through all these, so it sounds like you did well!!
etc. Again I suspect you thought this through.
As far as your homeowner’s deductible, obviously depends on your area, and risks associated with it: theft, fire, falling trees
Our biggest bugaboo is health insurance. It’s gone up $20/pay period, copays are going up by $5, and there’s higher deductibles for everything. S**ks, but I like the freedom of choice in the plan, so we’ll eat it for now. We’re keeping a huge FSA allowance, though, to compensate for these increases.
BTW, since you have a personal relationship with your agent, it wouldn’t hurt to check with him about probable insurance costs before purchasing your next car
January 6th, 2009 at 6:00 pm
Wow! You sure did your homework when considering those changes. I totally agree with changing the deductibles for the car and house insurance. Abigail did have a good point about recouping your cost in the long run. But, insurance in the long run is about preventing financial catastrophe and not financial inconveniences. Unless a burglar does a really thorough job of cleaning you out, or takes something particularly valuable, it’s more of an inconvenience than a catastrophe anyway.
January 6th, 2009 at 9:40 pm
Oh, I hate insurance. It’s so…grimy, taking bets out on a person’s life. And the concept of health insurance is even worse. I would never, ever work in the insurance industry.
I just moved and my car insurance went up $9. Why? Because “that’s the rate for your new neighborhood.” Never mind that my old neighborhood was in the ghetto (very, very much the ghetto), I lived on a busy main street, I didn’t have a driveway to park on and so parked on the street every night, and there was at least 1 car totaled every two or three weeks in that neighborhood — no exaggeration on that last one. You wouldn’t believe how many times I’ve gotten to call 911 for strangers and smashed cars. Never mind that my NEW place has a drive way and a garage, is on a side street (that pretty much only has local traffic from what I’ve seen), is in a very quiet neighborhood, is not located anywhere near the projects… Because “the computer says this is the current rate” and well, who am I to argue with the computer? (Sorry to vent!)
January 6th, 2009 at 9:45 pm
I am a product manager for an auto insurance company and I think you have a pretty good picture of how things work.
There are too many people who really do not get insurance. You are right, if you have an older vehicle, you might not want to have comprehensive (protects you against theft, hail or deer hits) or collision (protects you against damage to your vehicle caused by accidents). Your company will only pay out the actual cash value for your vehicle, so an older car may not be the best on which to carry full coverage.
On the other hand many do not have enough “liability coverage”, which protects you against other people suing you after an accident. Many people are one bad wreck away from losing everything. Not to be a fear monger, but I have seen many accidents where the medical costs were hundreds of thousands of dollars. It is scary - and in some states they can come after your house or retirement accounts (they cannot come after your house or 401k in my state, however).
Another thing to consider is umbrella coverage (which protects you above and beyond your auto and homeowners policy). Often you can buy $1 million of coverage for $200 or $300 per year.
Also, read your homeowners policy contract to see what is covered. There are many differences between contracts, even within the same state, so know what you have. Often times there is a reason why a policy is a lot cheaper.
Lastly, you should shop your policy every few years. Companies change rates frequently, so you might get a better deal elsewhere. Just stick with a reputable company with a good AM Best rating (a measure of financial strength) so that you get your claims paid.
January 6th, 2009 at 9:51 pm
@brista: I know that it is frustrating when you move and your rates go up. But if you are with a good company, they likely are basing your rates on actual loss experience for your area. For example, if you live in a better neighborhood, your Comprehensive coverage may be cheaper since theft is less common, but your Collision may be higher because people in your area drive further to work and get into accidents more frequently.
(Heck the people getting to accidents on your old street could be from your new area, but they are just “passing through” on their way to work, who knows.)
January 6th, 2009 at 11:53 pm
One thing I’ll recommend: getting PIP (personal insurance protection). I unfortunately had 2 car accidents within a year of each other. I didn’t have it on the first one, and I have a lawyer filing a claim for some basic chiropractic care to cover medical expenses. I either had to pay out of pocket, or find a chiropractor that would not need payment for a few years (while the suit is unresolved). Luckily the latter is working out.
My chiro beat me over the head for not having PIP coverage. Insurance companies don’t like to have you have it - if you use it, it costs them money. Ask for it! I had another car accident 9 months later (both not my fault, fwiw), with a suspended driver in a borrowed car that was not insured. Luckily I had signed up for PIP. Now all my medical (and I definitely needed more this time around, we were hit pretty hard), is covered, completely, up to 25K, for both myself and my boyfriend (he was injured worse than me).
Please get it - if you are ever in an accident and get hurt, it will cover all medical expenses, easy breazy, no questions asked. I recommend it, even if it costs more. How many times have you heard of medical costs destroying someone’s finances?
January 6th, 2009 at 11:59 pm
Hmm, it’s about time for us to renew our insurance. Thanks for the tips, hopefully I can save some money.
January 7th, 2009 at 3:56 pm
Do you mind sharing your insurance company?
We are shopping for insurance too. Our rates just went up 430%. Simply not acceptable.
January 7th, 2009 at 4:42 pm
A 430% increase is insane!
We have Allstate. Where we live, it was the most affordable options of the companies we were willing to consider. Rates vary widely by location though - we haven’t always had Allstate, other places we had another company that was less expensive.
January 7th, 2009 at 10:16 pm
That’s one of the reasons I like having a local insurance company - one I can just walk into and talk to whenever the need arises. Seems to be so much more personable to be able to handle these things in person.
I also have no collision on the 35 yr old truck - for a $600 value, it’s just not worth the expense. But the Forester has full coverage - which I found after I bought the car is more expensive (it’s considered an SUV) than the Legacy wagon would have been… So yes, do ask ahead about potential new purchases and the comparable insurance costs on various models - It can make a big difference.
I also would encourage the umbrella policy. Just in case. It’s a sue-happy world!
January 8th, 2009 at 10:34 am
I wuz about to say the same thing Chris did, but he beat me too it. My son, who is an insurance claims adjuster, urged me to get umbrella coverage. He said that if you get into an accident that is even partially your fault (insurance companies assign degrees of “fault” to all drivers involved in a wreck) and other parties in the accident rack up medical bills that exceed the amount of your coverage, your insurance will pay out only the amount for which you are insured. You can be held personally liable for the costs over and above that amount.
In other words, if you have $100,000 worth of coverage and some poor wretch breaks his neck in an accident that you caused (or are held even partly responsible for causing!), his medical costs will go way, way over a hundred grand. My appendectomy — which kept me in the hospital less than 24 hours — cost over $20,000. Imagine what it would cost to save someone’s life and then treat his quadriplegia! And arrange permanent care for him as long as he lives, which could be many, many years. If he racks up a million dollars worth of bills, you could find yourself having to pay $900,000.
He was lobbying me along those lines and I was resisting, because I didn’t want to increase my already substantial insurance costs. Then one evening I was flying up a main drag after dark, exceeding the speed limit by my usual 10 mph, when a jogger ran out into the road in front of my car.
I managed to miss the clown by about two feet. But I realized that because I was speeding, if I had hit him I would have been held at fault for whatever injuries he sustained, which would have been huge. That’s when I called and took out a million-dollar umbrella.
Even that is probably not enough.
January 9th, 2009 at 4:40 am
I agree that adjusting the deductible on an auto policy can really make for some savings. I recently raised mine to $1,000 from $250, and save almost $25/month. That really adds up over time if you think about it.
January 18th, 2009 at 7:21 pm
@debtmaven — Personal Injury Protection, not Personal Insurance Protection
Insurance companies offer PIP in states where they have to, and they charge based on costs. In no way do they “don’t like to have you have it”.
In fact, PIP usually keeps costs DOWN for insurance companies. It reduces frivolous lawsuits — if your PIP coverage pays your medical bills, then no one is getting sued.
Unfortunately, PIP laws are FAR from perfect. In some states, you only have to incur a specified amount of medical bills before your right to sue comes back. So, crooked doctors (and crooked “doctors”), in conjuction with crooked lawyers, perform unnecessary treatments to jack up the bills…
(In no way am I trying to say that all doctors or all lawyers are crooked. In fact, the overwhelming majority of them are wonderful.)
January 22nd, 2009 at 2:45 pm
I recently checked-in with my Allstate agent for ways to save on my house/auto insurance. Guess what he found about my homeowners policy– my 1100 sq ft. unfinished basement had mistakenly been tagged as living space!! ACK! For the last four years I’ve been paying almost $300 extra per year. I’m working on a rebate– but they will only go back one year.
It’s better than nothing I guess and I’m better off going forward.
POTUS