Save Money on Insurance
How to ensure high premiums don’t drain your budget.
Insurance is one of those expenses most people can’t avoid. Whether you own a car, have a mortgage, or want to protect your family financially, insurance is often a necessity. Unfortunately, rising premiums have made it more difficult for many households to fit insurance costs into their budgets.
The good news is that there are ways to reduce insurance expenses without sacrificing essential coverage.
Review your policies regularly. Compare quotes and ask about discounts. These simple steps may help lower your premiums and free up money for other financial goals.
Key Takeaways
- Insurance is a necessary expense, but there are ways to reduce premiums without sacrificing important coverage.
- Shopping around for insurance annually can help you find lower rates and new discounts.
- Your credit history may affect auto and homeowners insurance premiums in some states.
- Raising deductibles can lower monthly insurance costs if you can afford higher out-of-pocket expenses.
- Bundling policies with the same insurer may provide discounts.
- Choosing the right type and amount of life insurance can help prevent overpaying for coverage.
Tips for cutting auto insurance costs
Auto insurance costs are determined by how the underwriter assesses your risk as a driver, combined with the risk of the vehicle you own. In some cases, depending on where you live, the insurer may also consider your credit-based insurance score, which means your ability to manage debt and maintain good credit can also impact your premiums.
When assessing your risk, auto insurers look at your gender, age, driving record, marital status, prior coverage, and how urbanized the area is where you live. In states where credit-based insurance scores come into play, they also look at your credit. Then they take into consideration the make and model of the vehicle to be insured and the mileage on it.
The amount you pay varies based on the type of coverage you have, which in turn varies by state. Some states have no-fault auto insurance standards where the insurer pays directly for any losses. Other states have tort insurance which offers different types of coverage based on what you need – these are the states where you see everything from comprehensive coverage to collision coverage.
In either case, there are some steps you can take to minimize your auto insurance costs:
- Talk to your agent often: Pay attention to correspondence – even things that look like general ads and spam in your inbox – because your insurance company may have a new discount they’re offering that could help you save.
- Shop around once every year: Even if your situation hasn’t changed, you could still qualify for lower premiums. Insurance companies regularly adjust how they assess risk and price coverage, so it pays to compare rates every year. When you comparison shop for insurance, don’t just call your agent – talk to different companies to ensure you’re getting the coverage you need at the best price.
- Check to see if your state allows insurers to use credit-based insurance scores: If insurers can use credit-based insurance scores in your state, improving your credit may help lower your premiums. Take six months to build your credit, then shop around for rates once your credit history is clean and you’ve made progress building a better score.
- Maintain a clean driving record to ensure your bad habits don’t drive up your premiums.
- Make sure when you’re ready to purchase a new car that you factor in potential increased insurance costs: Safer cars mean lower insurance costs, while things like sports cars have higher insurance costs.
- Don’t pay for more insurance than you need: Having full comprehensive coverage may not make sense if you have a car that’s over 10 years old. Again, talk to your agent to make sure your coverage matches what you need – and what you drive.
Tips for cutting homeowners insurance
Homeowners insurance premiums are influenced by several factors, including where you live, the value of your home, local weather risks, your claims history, and, in some states, your credit-based insurance score.
Location remains one of the biggest factors. Costs vary by state, and certain areas may require additional coverage for risks such as flooding, wind damage, or wildfires. In some states, insurers may also consider a credit-based insurance score when determining premiums.
The easiest way to lower your premiums is to find and apply discounts. During the underwriting process, the insurer will assess your home based on the condition it’s in at the time of purchase. However, as you own the home and renovate or make upgrades, you may qualify to pay less for your homeowner’s insurance. Always check with your agent before making improvements to ensure they won’t increase your insurance costs and to see whether you qualify for additional discounts.
Another way to lower your monthly payments is to increase your deductible. This means more of a loss would come out of your pocket when losses are incurred, but the amount you pay each month would be lower. So, if you can afford a deductible of $1,000 but your current deductible is set at $500, then you should talk to your agent about raising it.
Bundling multiple insurance policies with the same provider may also help lower your costs. Many insurers offer discounts when you bundle multiple policies, such as auto and homeowners insurance. The amount you save varies by provider and coverage type.
Tips for cutting life insurance costs
The first recommendation is to decide if you really need life insurance or not. If you’re in your 20’s, unmarried with no kids, then there isn’t much reason for you to need substantial life insurance at all. Even if you’re married with kids, but you don’t work or your income isn’t required to support the household, you may not need it.
Life insurance is there to help your family in case you can’t provide the necessary income that you usually provide to the household. It can also be used to cover things like funeral expenses, but you don’t need a $50,000 policy to pay for that – in general, funeral costs typically range from $7,000 to $12,000.
In general, your life insurance should be based on what you make, how long your family would need that income to continue living comfortably before they can adjust to that loss of income and what other assets you have to support them if you’re not there.
Once you decide if you need life insurance and how much you need it, then the next way to save is to decide if you want term life insurance or whole/universal/permanent life insurance. The former is called term life insurance because it has a term applied – a period of time where the policy is valid at that premium. Terms vary from one year to up to 20 years.
Whole/universal life insurance is permanent – you have it for as long as you’re around and it may even provide “living benefits” if you have a serious accident or injury. It can also grow as an investment and earn dividends (term doesn’t do this). This is the more expensive of the two.
The easiest way to reduce the cost of life insurance while still ensuring your family is properly covered is to opt for term life insurance. Of course, each time you renew a term life insurance policy, keep in mind you can expect your rates to increase as you keep the policy for longer and longer period
Frequently asked questions
You may be able to lower insurance costs by comparing quotes from multiple companies, increasing your deductible, maintaining good credit, qualifying for discounts, and bundling policies with the same insurer.
In many states, insurers may use a credit-based insurance score when determining premiums. Improving your credit may help you qualify for lower rates.
Many experts recommend comparing insurance quotes at least once a year or whenever your financial situation, vehicle, or home changes significantly.
Bundling auto, homeowners, renters, or other policies with the same insurer may result in discounts and simplified account management.
Term life insurance provides coverage for a specific period of time, while whole life insurance offers permanent coverage and may include a cash value component. Term policies generally cost less than whole life policies.
Increasing your deductible can lower monthly premiums, but you’ll pay more out of pocket if you file a claim. Make sure you have enough savings to cover the higher deductible before making a change.
The amount of life insurance you need depends on your income, debts, financial obligations, and the needs of your dependents. The goal is to provide financial support for those who rely on your income.
Insurance premiums have risen in many areas due to higher repair and construction costs, medical inflation, severe weather events, and larger claim payouts. While these factors are often outside consumers’ control, shopping around regularly and reviewing your coverage may help reduce costs.
Final thoughts
Insurance is an essential part of protecting your finances, but that doesn’t mean you have to overpay for coverage. Reviewing your policies regularly, comparing quotes, improving your credit, and taking advantage of discounts can help keep premiums under control. The money you save on insurance can be used to strengthen other parts of your financial plan, whether that’s paying down debt, building an emergency fund, or saving for future goals.
