Eight Rules for Saving Money When You Buy Insurance
Below is a MRR and PLR article in category Finance -> subcategory Insurance.
Eight Rules to Save Money on Insurance
Want to save on your insurance next year? Here are eight tips from Stephen L. Nelson, CPA and author of Quicken for Dummies.
1. Insure Only Against Major Financial Risks
Insurance should protect you from catastrophes that would deeply impact your finances. Avoid covering every minor expense, as this leads to spending unnecessarily. For instance, homeowners insurance is crucial because you likely can't afford to rebuild after a fire. In contrast, insuring an old car worth $800 may not be wise.
2. Choose Reliable Insurers
Select insurance firms rated A or higher by A.M. Best, a company that evaluates insurers' reliability. Insurance companies can face economic challenges or go bankrupt, so it's crucial to choose wisely. Regularly verify your insurer's rating to ensure it remains high. Check these ratings online at www.ambest.com or at your local library.
3. Shop Around for the Best Deals
Insurance policies vary widely, and prices aren’t always advertised. Do some research to find the best policy for your needs. Consult at least two brokers and consider no-load companies, which sell directly to consumers, often at lower prices.
4. Be Honest on Applications
Lying on insurance applications can lead to policy cancellation. If a lie is uncovered, especially within the first three years of a life insurance policy, benefits may be denied. Insurers often verify information through databases like the Medical Information Bureau, and medical exams can reveal omissions.
5. Opt for Comprehensive Coverage
Broad coverage is more beneficial than specific-risk policies. Avoid niche policies like cancer insurance if comprehensive medical insurance is available. Although some attorneys recommend uninsured motorist insurance for potential legal benefits, adequate personal car, health, and life insurance can offer similar protection.
6. Don’t Cancel Without a Replacement
Always have a new policy ready before canceling an old one. This prevents any uninsured periods which could be financially damaging, especially for older individuals who might struggle to find new policies.
7. Consider High Deductibles
High-deductible policies can significantly reduce premiums. While you’ll pay more out-of-pocket for smaller claims, you’ll avoid frequent claims that could increase your rates. Most people encounter minor accidents infrequently, and the potential savings outweigh the occasional costs.
8. Build a Strong Rainy Day Fund
Instead of splurging on luxuries with saved premium money, enhance your emergency fund. A substantial rainy day fund can help cover deductibles and provide financial support during unemployment.
By following these rules, you’ll not only save money but also make informed, strategic choices when purchasing insurance.
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