REDUCING INSURANCE COSTSHave you looked at your insurance costs lately? Chances are, your costs have gone up even if your coverage has remained the same. Insurance inflation is a hidden danger because you don’t always pay those bills every month or pay them directly. And when they do rise, there seems to be no practical way to control them. Let’s look at some major insurance categories to see where cost-cutting might be possible. LIFE INSURANCEIf you are the breadwinner of a family, you shouldn’t ignore life insurance. But what kind do you need, how much – and at what cost?Whole Life is the most expensive because over the years this insurance accumulates cash value as well as provides a guaranteed benefit, payable to your family, in the event of your death. However, policy costs can vary considerably from one company to another – even for the same coverage. Your occupation, where you live, your general health, and even your credit rating are all part of the actuarial equation that determines your risks. But different insurers apply different cost factors to those risks. That’s why it’s always a good idea to comparison shop through an independent agent who can get competitive quotes from different insurance companies. Term Life limits coverage to a period of time in order to protect your dependents when they are most vulnerable to income loss. For example, you may wish to protect your spouse and children up to and through college age or during the years when you are paying off a mortgage. With term life you can buy higher limits at much lower costs because there usually is no cash value. At the end of the term, the policy lapses. This is one kind of insurance many companies offer employees at little or no cost. You may be able to buy it without providing evidence of good health. Look for term policies with a guaranteed renewal feature. And check out a new product, Return-of-Premium Term Life, that gives you a refund of all premiums paid if you outlive your initial rate guarantee period. The best rates for life insurance are usually available to members of groups because insurance companies offer discounts to groups. If you buy a policy when you are young, you will also save on premium costs; however, you can expect premiums to rise when you enter into higher age brackets or if you develop chronic health conditions. A disability waiver on your life insurance is a good low-cost option. If you become disabled, the life premiums are waived. DISABILITY INSURANCESome experts consider disability insurance more important than life insurance. Disability insurance replaces some of your lost income if you’re unable to work due to sickness or injury. As The Motley Fool (www.fool.com) puts it, disability insurance protects one more member of your family than life insurance – you.While many employers provide long- and short-term disability coverage as a benefit, a private disability policy is the best way for most workers to ensure adequate income, according to the Insurance Information Institute. A disability policy rarely pays more than 60% to 70% of your income, but when you pay the premiums yourself, disability benefits are not taxed. You can trim the cost of disability insurance by: 1.) electing a longer waiting period before benefits begin (the “elimination period”) and 2.) electing a shorter benefit period (benefits payable to age 65 instead of for a lifetime). AUTO AND HOMEIf your home is mortgaged or your car is financed, the lenders will require insurance coverage that is sufficient to protect their loans if not you, your possessions, and third parties at risk. But as home values increase, so do your insurance costs if you raise coverage to keep pace with higher values.If you paid less than 20 percent down payment when you bought your home, your lender may have required you to buy Private Mortgage Insurance (PMI). PMI doesn’t protect you or your home, it protects the lender in case you default on the loan. If the equity you have accumulated exceeds the 20 percent requirement, there may be no reason to continue paying PMI. Contact your lender or mortgage servicer to learn whether you are paying PMI and how and when it can be terminated or cancelled. If you own your home and/or vehicles outright, you still have damage and replacement costs to protect. The alternative to expensive excessive coverage is “self insurance,” which means you have the assets to cover first party losses due to theft or damage to your home or car. Auto comprehensive and collision coverages generally max out at the book value of the vehicle less the deductible you choose. The higher the deductible, the lower the premium. This is one area where self-insurance can lower you bill. If your car is old with a low book value, you might want to drop collision coverage altogether. HOW TO CUT COSTS
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