Car and Home Insurance

Car and Home Insurance 

Do not skimp on insurance. This probably does not sound like a way to save money. But remember the purpose of insurance is to transfer to an insurance company the financial risk you can not afford to carry yourself. Without formal insurance, you are basically self-insuring - meaning you must pay out of own pocket in the event of a financial disaster such as loss of a home or a serious illness. 

For example, many renters do not even hire insurance covering the loss of their personal belongings (no, the landlord's insurance does not cover it). Tenant insurance is very affordable, but how many times can you read about people who lose everything in an apartment fire and have no insurance. 

Buy insurance you need. Carefully review your insurance needs with your financial advisor. Car, medical and home insurance are probably obvious. But you have disability insurance if you lose income because of an illness or injury? Many financial planners recommend clients buy long term care insurance not later than their late 50s or early 60s two cover the high cost of potential long-term care. Do you warranty coverage than standard auto and home insurance if you are sued? 

Watch out for holes. People with multiple properties in several states, for example, often use multiple insurance agents for their property and accident coverage, and can easily end up with expensive duplicated coverage - or worse, no coverage at all for some property because it was overlooked or because a policy expired. You may need "riders" or "floaters" to provide extra coverage for such things as jewelry or antiques whose value is limited by the general policy. 

And you do not buy it, you do not. You will probably need life insurance, but not necessarily. Life insurance generally is for people whose death will have significant economic consequences for others - a spouse, child, dependent on parents, heirs who might face a hefty property tax bill. You may not need it if you are young and single. And as you age, you may need coverage for a limited period or for a lesser amount. 

You also probably do not need to spend pounds on insurance for flights, pets, specific diseases, loans and car hire. Buy the right amount of insurance. While people sometimes buy too much of a particular insurance, more often they are insured. 

A good example where this is common is life insurance. People often base their decision on extra charges, not what death benefits they need. The best strategy is to first calculate how much money you have to replace the future loss of income necessary for your dependents. Then look at insurance options. Some people can afford to buy adequate death benefits through a whole life policy which has an investment component. But many others would be better off using their limited insurance pounds on term life, which has no investment component and which allows you to buy more death benefit coverage for each premium pound. 

Shop around. Costs vary significantly among carriers, so carefully compare the same coverage and features. But you do not buy on price alone. You want a carrier that is financially sound, so it is there if you need the benefits. 

Consider multiple policies with a single carrier. You can often get a better deal buying multiple policies through a carrier, such as automotive, home and liability. But not all carriers are strong in all lines. They may be good for property and casualty but not life and health, so be sure any savings are worth it. 

Help yourself. Staying healthy, putting smoke alarms and security systems in your house, and have a good driving record can keep premiums down. 

Increase deductibles and avoid small claims. Choosing larger deductibles will reduce your premium costs (self-insure the deductible through an emergency fund). They also reduce small claims, which has become a sore point in insurance because companies are increasingly raising premiums or even dropping customers who make many small (and large) claims.