Guest Post: 5 Ways to Slash Your Insurance Costs

by Dual Income No Kids on May 7, 2009 · 0 comments

Regardless of your current economic situation, cutting expenses and saving additional money is always welcome. You may be surprised to realize how much of your monthly expenses go to insurance companies. While some of this coverage is prudent, most people can examine, change, or eliminate insurance policies for huge savings without losing security.

1. Save and Invest Health Insurance Premiums. If you must pay health insurance premiums, consider a tax advantaged Health Savings Account and high deductible health insurance policy. You can invest the premium savings into your account, earn interest, and deduct those savings (within IRS limits) from your income tax. The higher deductible health insurance policy should also be much cheaper than a lower deductible plan.

In addition, you can use the account to pay for a variety of medical services, like dental or vision care, that are not covered by major medical insurance. Since you can deduct the account savings from your income taxes, you can think of that deduction as a discount on medical services!

You can roll over your savings from year to year, and keep earning more interest. At retirement age, you can withdraw the savings with no tax penalty. So if you were lucky, and did not have to spend all of your savings on medical services, you can add it to your retirement savings.

2. Auto Insurance Premiums. Did you know that the difference between a $500 deductible and a $1500 deductible can be hundreds of premium dollars every year? If you could take part of that premium difference and save it in an interest bearing emergency fund, you would be far ahead if you can avoid making an auto insurance claim for several months.

Sure, you need to consider how much you can afford to pay if you do have an accident. But the higher premium for the lower deductible puts you in a situation where your expenses are much higher, and you will be less likely to have savings.

3. Save Hundreds on Disability or Long Term Care Insurance Premiums. Most Long Term Care (LTC) policies have one thing in common with disability policies. They both include waiting periods before coverage will start paying, and they also have a set time limit that they will provide coverage.

The waiting period may vary between a few weeks to a number of months. Likewise the coverage time could vary from months to years to lifetime coverage.
Insurers have flexible types of plans to vary from short term to long term coverage, and also to keep premiums more affordable by excluding very short term needs for their products. For instance, a disability policy with a 60 day waiting period was not meant to cover a minor illness that only caused a covered person to miss a few days of work.

If you can adjust your waiting period, before coverage kicks in, to 3 months instead of 3 weeks, your premium will drop dramatically. Likewise, an adjustment over the coverage period will also drop your premiums. It can certainly benefit you to set aside some, or all, of this premium difference in case of a shorter term emergency.

4. Do you need all of your insurance? One type of insurance that costs a lot for the value is credit insurance, such as the type sold by credit card companies to their customers. You usually pay a percentage of the outstanding balance so that your minimum payments will be made if you lose your job, or so that the balance can be paid off if you become disabled or pass away.

But the premium is usually charged back to that same credit card. You may not just be paying a premium, but also paying interest on that premium! The very coverage that should protect your credit may actually be making the situation worse.

Most people would be better served by eliminating that monthly charge and using that amount of money to try and eliminate debt.

5. Shop Around. Do not assume that all insurers set rates the same way, or that your old insurer is giving you the lowest rates out of loyalty. Many people compare insurance companies every year to make sure they have top qualify coverage at the best rates. Online insurance quote forms make this task much simpler.

This article was written by Barbara Waltz, an industry expert and one of the founders of a well known insurance blog.

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