Paycheck Chronicles

Keeping Insurance Costs Low


If you own a home, you should have homeowners insurance.  In fact, your mortgage probably requires it.  Insurance protects the house itself from fire and other damaged (but not all of them) and also protects the contents from damage or theft.  I can't imagine any situation in which insurance wouldn't be a good idea.  Unfortunately, it looks like the cost of homeowners insurance is going to be going up, and for some people that increase could be large.  An article at CNNMoney talks about the reasons for the increase and ways that you can keep your costs down.  I suggest you check out the list and consider which ones you might be able to try.  Here are my suggestions in order of importance and ease:

  1. Lower your deductible.  This is a win-win decision for nearly everyone.  Most insurers offer several deductibles on each type of insurance.  I always choose the highest deductible.  In the case of my homeowner's insurance, that is $2,000.  Here's my logic:  I'm not going to claim anything less than $2,000 on my homeowner's insurance, because it would raise my rates and possibly cause me to lose my coverage.  If a catastrophe hits, and I do file a claim, then $2,000 will be only a fraction of the amount involved and is truly an amount that I can find a way to cover, either with my emergency fund or other creative financing.  Many of those things, like using a credit card, aren't things that I would recommend, but if we are truly talking about a huge loss, it will be the least of my worries.  In addition, I set up an automatic deduction from my checking account to a special "deductible" savings account.  I'm having $10 per pay period put into that account - I'm already over five hundred dollars!  Once that account reaches $2,000, then I'll stop paying towards it.  That way I'm self-insuring for that first $2,000 of claims.  My policy decrease was less than $100 per year, but that adds up pretty quickly.  Plus, knowing that my deductible is so high keeps me from wanting to make claims, which will help keep my rates low.
  2. Compare insurance.  Truly, USAA is most likely to have the best rates and the best service around.  However, it won't hurt you to make a few phone calls.  Make sure that you are comparing the same insurance - replacement value coverage, various discounts, and other variables.  Make sure it is a stable and good company.  The National Association of Insurance Commissioners ( tells about various companies, including complaints.
  3. Make sure you are getting all your discounts:  Do you have an alarm system?  (Make sure to note if it is a monitored system.)  Do you have deadbolt locks?  Smoke alarms?  A sprinkler system?  Ask your insurance company if there are other discounts for which you might qualify - a gated condo community, a non-smoking house, or a particular group (college alumni, credit union, or similar.)  Those discounts can really add up!
  4. Check your credit rating and CLUE report to make sure that the information is accurate. 
  5. Find out which payment plan has no extra costs.  Many insurers offer a discount for automatic payments, or charge a fee if you spread your payments out over the term of the policy.  Ask which plan will be the least expensive for you.

More great information is available from the Insurance Information Institute.  Hopefully you can use these tips to keep those insurance bills as low as possible.

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