Evaluating Your Insurance Needs on a Tight Budget

In this economy, every penny counts. Everyone is evaluating what sacrifices they can make to pay the bills.

It’s one thing to downsize from the six-thousand-square-foot home, or to drop the third car. However, when it comes to downsizing your insurance, careful consideration should be taken.

If you’re struggling to make ends meet, discuss with your agent ways to save money on your insurance portfolio. Sometimes you can get a discount if you consolidate your auto insurance with your homeowner’s plan. Or maybe you can get a good student driver discount for your kids.

Evaluating your insurance needs, is specific to each individual, and no two cases are exactly the same. A premium is derived from so many factors. It’s worth doing a periodic review even in stable times to determine if your insurance needs have changed or if you can get a better price.

Checklist: Evaluate Your Insurance Needs

Review your assets and liabilities to determine your net worth. Your net worth will help you decide how much insurance you need. Sometimes people in tight times cut their liability insurance, but this may not be where you are spending extra money. Check with your agent as to how your policy is structured.Review with your agent how a personal articles floater for valuable items can save you money. Are you storing your valuables in a safe-deposit box when they’re not in use? That can affect your premium, too.
Review the physical damage coverage (collision and comprehensive) on your vehicle. When a vehicle is about eight years old, it might make sense to drop the collision coverage. Collision coverage is paid based on actual cash value versus replacement cost. If you are involved in a collision, you will never be reimbursed the cost of a new car. It may be time to evaluate how much you’re paying in premium for an older car.

Explore Ways to Get Discounts on Your Insurance

Paying your premium in full (if it is an annual policy or a semiannual policy) will garner you a discount. Carriers like when people pay in full because it’s less costly to administer their account, and it eliminates the extra administrative work required when payments are consistently late and cancellation notices have to be sent.

Some carriers offer discounts for establishing an electronic funds transfer (EFT) account if you pay monthly. While you’ll still pay installment fees, they will be less, because you are reducing the likelihood that payments will be late.

There are also discounts for shopping your insurance with a ten- to twenty-day advance notice to the renewal date. Carriers are generous with this as a discount because it gives them more time to organize a sound insurance plan.

Cutting costs may be the goal, however, cutting insurance may not be the best solution. Review your insurance portfolio with your agent to see what savings you can enjoy. Sacrificing critical insurance coverage to save money is a dicey strategy.

Linda Rey is a licensed insurance agent at Rey Insurance with a broad spectrum of expertise in life, accident, health, property and casualty insurance as well as retirement planning and college funding strategies.

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