Insurance can be one of the biggest expenses in the family budget. Maybe it's time to cut some of the costs. Chances are you need significant insurance coverage; however, don't buy into sales arguments that you need costly insurance that provides coverage for only a limited range of events. It's always preferable to acquire broad coverage.
Here are some examples of insurance you can probably do without:
- Rental-car insurance. You probably don't need rental-car insurance, despite the often vigorous efforts by the agents to sell you this costly coverage. Most personal auto insurance covers accidents involving the car you rent for personal use. In addition, most major credit cards also cover rental-car damage when you use a credit card to rent the car. Check with your insurance agent and credit card provider for more details.
- Travel insurance. Travel-accident and travel-related life insurance is a waste of money unless you have a premonition, in which case you should cancel the trip altogether. Also, skip insurance to cover lost or stolen items when you travel. Your homeowners or renters insurance should cover you, but double-check your coverage with your agent.
In addition, airlines typically reimburse passengers for lost or stolen domestic baggage subject to dollar limits. If you paid for your ticket with a credit card, additional coverage for lost baggage might already be included.
- Trip-cancellation insurance. You don't need travel-cancellation insurance every time you go out of town. Airlines usually let you change your plans for a fee, say $50 or $100, depending on the carrier. Trip-cancellation insurance might be a good idea, however, if you are planning to take an expensive cruise or a lengthy sojourn and are concerned you may have to cancel.
- Critical-illness insurance. You may want to stay away from a critical-illness policy if you already have health insurance. These policies only protect you in the event that some specific illness befalls you, like cancer.
- Mortgage insurance. Unless you're ineligible for term life insurance, avoid insurance that will pay off your mortgage if you die. The price of mortgage-insurance coverage declines as you pay down your mortgage, yet the premium stays the same. By contrast, the value of the death benefit on term life insurance doesn't decline, and the premiums are usually far cheaper. By contrast, the commission on some mortgage-insurance policies is more than 90 percent of the premium cost.
- Non-medical life insurance. You may get a solicitation in the mail offering you life insurance that doesn't require a medical examination. If you're near death, it's a great deal. Otherwise, this coverage is shamefully expensive, although the slick advertising makes it seem cheap.
- Identity-theft coverage. Generally, you can forget identity-theft insurance—and credit-report monitoring services, for that matter. Many homeowner's and renter's insurance policies already cover identity theft, so check with your agent.
As for the credit-report monitoring service, you're already entitled to one free credit report annually.
Avoid Overpaying for Unnecessary Coverage
You may already be overpaying for the insurance you have, probably by hundreds of dollars a year. The bells and whistles offered in addition to basic coverage are rarely used, so they are big moneymakers for the insurance companies. Here are some of the main culprits and what you can do to lower your premiums:
Your homeowner's or renter's insurance: Increase the deductibles if you can afford to do so.
- Your aging car: If you have an old car, worth under $4,000, consider eliminating collision and comprehensive coverage and increasing your deductible. If you own a newer car, you can likely forgo towing and substitute transportation coverage.
- Your aging life-insurance policies: Life insurance needs often decline as you age, and you might be able to eliminate this expense. Replace life with a term insurance policy if you can find cheaper coverage this way.
- Duplicate health coverage: If both spouses are covered by health insurance, you probably need only one policy.
- Private mortgage insurance: Cancel this—often required when you take out a mortgage—if you have at least 20 percent equity in your home. You're legally entitled to do so in most instances.
Be sure to review your insurance policies periodically to make sure they reflect your current situation. For example, if you have children away at school who aren't driving, you may be able to remove them temporarily from your auto policy during school terms.
Finally, here are some suggestions on how to save even more on insurance costs:
- Earn discounts by purchasing all your policies from one insurance company. Many insurance companies offer discounts to customers who purchase multiple policies, such as automobile, homeowner's, and umbrella liability, from them.
- Inquire about discounts. Many insurers offer discounts to homeowners who take protective measures against fire and burglary. You may also qualify for discounts from your automobile insurer, but you need to inquire.
- Comparison-shop for coverage. By all means, ask your insurance agent to shop for lower cost coverage, or do it yourself. The Internet can be a useful way to compare premiums. Some sites you can use include Progressive.com and Esurance.com.
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