Friday, March 19, 2010

Dissect Your Budget - Part 7 - Insurance

Tip #243 - Dissect Your Budget - Part 7 - Insurance. I just heard a collective groan from the readers of this blog. Because while shopping for places to live - even if it's a smaller house to save money - is a lot of fun. And going on treasure hunts in the thrift store for clothes on the cheap is often an adventure. Even finding alternative means to get to work isn't too bad of a job. But looking for lower-priced insurance is about as much fun as getting a tooth extracted, without getting the milkshake afterwards. But in an effort to examine all aspects of your budget in order to lower your expenses, looking into your insurance costs is a must.

Insurance can cover various parts of your budget - there is car insurance, health insurance, life insurance, and homeowners insurance, as well as possibly a few others. We touched on car insurance in the previous post. Today, let's discuss, property/casualty insurance also known as homeowners and renters insurance. We will discuss helath and life insurance in a post related to healthcare costs. Regardless of whether you rent or own your home, you really need to have insurance on it. Part of that insurance (property) covers the cost of replacing/repairing your items should they get stolen, lost, or ruined in a disaster. The other part of the insurance - casualty insurance covers you if someone should injure themselves on your property. A lot of renters do not bother to buy renters' insurance because they figure they don't have many expensive items to replace. But if someone burglarizes your house and steals your camera, television, and your computer, you would be spending a lot of money replacing these items. In contrast, renters' insurance is cheap. For just a few dollars per month you would have protection from big lossses. More people are likely to buy homeowners insurance as the potential for loss is much greater. Also, most mortgage lenders require the borrower to have homeoners insurance.

Regardless of whether you are a homeowner or a renter, it is a good idea to have at least a minimum amount of insurance on your home or contents. Assuming you have insurance, there are ways to bring down the costs. The first way is to take stock of what type of coverage you really need. There are numerous online calculators that can help you determine how much insurance you need. Be mindful of the ones sponsored by insurance companies, however, since they have a vested interest in your buying more insurance. After you determine the type and how much coverage you want, you need to decide how much of a deductible you are willing to pay as a deductible if something happens to your home. Some people prefer to carry high deductibles to keep costs down and to use the insurance in only catastropic events rather than small ones.

After you have decided on the amount of coverage and the deductible, it is time to shop around. Coverage costs can vary quite a bit among insurance companies. The first place you want to contact is the company that insures your car. They will usually give a discount if you have multiple policies with them. Next, you should talk to friends and neighbors. In some areas (such as Florida), there are only a few companies that will insure there, so it's best to hone in on that information. Lastly, you can search the internet or just call around for competing quotes.

Even if you have insurance and love the company you are with, it is still worth it to look into other companies' policies every few years. Prices change, needs change, and competition changes, so another company might better meet your needs at a different time. Sometimes inertia can be bad for the bottom line. Insurance is not something any of us want to spend a lot of money on, but it is something that most of us should have. Finding the best price for what you want is the best way to keep this cost down.

In Real Life (IRL)
- I mentioned in the last post that my husband works in insurance. Specifically, he is an insurance underwriter. So while I am the main finance person in our household - setting the budget, deciding on where to invest, and what to save for (with his input, of course, but he's just not that interested), I defer all insurance purchases to him.

Having said that, my husband called around and found a good deal on homeowners' insurance on our condominium in Florida, which was not an easy feat due to all of the hurricanes there. When the roof on the building was recently redone, my husband found out that we could get a better deal on our insurance because of the extra protection it provides. By paying a mere $20 for some kind of certificate certifying the roof, we were able to cut our yearly insurance premium by over $100.

In the meantime, my parents who own a condo in the same complex were paying much more in insurance than we were. In addition, my husband was able to walk them through the steps to bring down their insurance premium because of the new roof. Just a few simple phone calls, a bit of back and forth, and another certificate on their part, and my parents were able to lower their bill, too. It's not fun to make those calls, bring up your insurance bill in converstation at cocktail parties, and research the best rates. But in the end, when the savings goes into your pocket or into your bank account, the extra work is worth it.

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