Five Ways to Reduce Automobile and Homeowners Insurance Costs

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I remember one of the main concepts I was taught in an undergraduate risk and insurance class is that you should self-insure if you can.  Remember that your insurance company has administrative costs and does not pay out what it collects in premiums and the return on investing your premiums.  The ideal relationship with your insurance company is that you don’t pay them much money and you never file a claim.  Insurance should only be for potential financial disasters that you can’t afford.  The best way to self-insure is to have an emergency fund, which you can use for a variety of bad things that can happen to you.

1.  Have the Highest Deductible You Can Afford

We have a $2,000 deductible on our Honda.  That is the highest deductible we can get. We can afford a $2,000 loss if we have one.  Our twenty-one year old daughter carries a lower deductible, because she can’t afford a $2,000 loss.  We just increased the deductible on our homeowners insurance from $1,000 to $2,500.   It saves us $86 a year in premium.

2.  Consider Dropping Comprehensive and Collision Coverage

We haven’t had comprehensive or collision coverage on the vehicles that we bought for around $5,000, figuring that we could absorb the loss.  Two of our cars that died would not have been covered.  On one, the transmission needed replacing, and it would have been more expensive to replace it than the value of the car.  On another, it was run without oil, which wrecked the engine.  It would have covered a van we had which I totaled hitting a deer at night.  I don’t have the numbers to calculate if I saved enough in premium on vehicles to pay for the totaled van.

3.  Get Discounts

We get discounts on our auto insurance for:

  • Multiple Line (auto and homeowners)
  • Safe Driver instruction for daughter
  • Multicar
  • Good Student (daughter)
  • Driver Training (daughter)
  • Vehicle Safety
  • Accident-Free

In recently talking to our insurance agent, we made sure we got a discount for our daughter being away at college.  I also started tracking our mileage, because we get a discount if we drive a vehicle less than 7,500 miles a year.  Our van probably will have very few miles this year.

Our insurance carrier also offers discounts on homeowners insurance:

  • Multiple Line (auto and homeowners)
  • Home Alert Protection  (this isn’t worth the cost to us, just for the insurance discount)
  • Roofing Discount (We just replaced our roof last year.  We would have gone with the longer lasting shingle, but we’re planning to move, so we wouldn’t recover the additional cost.)

4.  Shop Around

Clark Howard recommends USAA and Amica for auto and homeowners insurance.  I don’t qualify for USAA, because we don’t have armed services connections.  I checked out a quote from Amica, and its a bit higher than we are paying now.

5.  Keep Your Credit Score High

According to Consumer Reports, most insurance companies use credit scores in setting their premiums.

 

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