Taming Insurance Bills: Strategies For Cost-Effective Coverage

Keeping insurance bills and knowing how long to retain them can be tricky. It's important to consider the type of insurance and any relevant tax implications. For example, if you have a business auto insurance policy, it's recommended to keep statements for seven years in case of an IRS tax audit. For personal auto insurance, it's advisable to keep statements for as long as the policy is active, and potentially longer if you need to account for payments during tax time or have an unresolved claim. Similarly, for health insurance, it's best to retain all documentation as long as the policy is in effect. In contrast, utility bills and telephone bills can typically be discarded a year after payment unless needed for tax purposes. Ultimately, the decision on how long to keep insurance bills depends on individual circumstances, and it's essential to weigh the benefits of keeping records against the need to reduce clutter.

Shop around for insurance rates

Shopping around for insurance rates is an effective way to find the best deal for your needs and budget. Here are some tips to help you shop around for insurance rates:

Use Comparison Tools

Comparison tools on specific websites allow you to examine the costs of several providers simultaneously. These tools enable you to compare prices and determine which option aligns with your financial situation and requirements. Some examples of websites with comparison tools include The Zebra, Insurify, and NerdWallet.

Compare Rates from Multiple Companies

It is recommended to compare at least four prices to gain a better understanding of the pricing landscape. By doing so, you can identify the most affordable options and ensure you are getting the best deal.

Consider Different Shopping Methods

There are several ways to acquire car insurance coverage, each with its pros and cons:

• Option A: Contact an agent from a specific insurance company, known as a "captive" agent. They have in-depth knowledge of their company's coverage options but cannot provide comparisons with other providers.
• Option B: Work with an independent agent or broker who can offer coverage from multiple companies. This option allows for comparing premiums from different insurers, but these agents may also try to upsell you.
• Option C: Purchase a policy directly through an insurer's website. This method suits those who understand their coverage needs and prefer handling the process themselves.
• Option D: Use an online comparison platform to find the cheapest price. This option may be challenging if you are unsure about your coverage needs, but it offers a pressure-free shopping experience without agent involvement.

Inquire About Discounts

When comparing insurance providers, ask about available discounts. Many companies offer various discounts, such as deals for members of professional organizations, pay-in-full discounts, good driving discounts, and multi-vehicle discounts.

Choose the Right Coverage

Before shopping for insurance, determine the type and amount of coverage you need. Understand your state's minimum coverage requirements and consider adding additional coverage, such as collision insurance, comprehensive insurance, or uninsured/underinsured motorist coverage, to suit your specific needs.

Gather Necessary Information

To receive accurate insurance quotes, you will need to provide certain information, including personal details (name, birth date, address), vehicle information (VIN, make, model, year, mileage), and drivers' information (drivers' license numbers, birthdates).

Shop Frequently

Insurance rates can change over time, so it is recommended to shop for insurance and compare rates annually or whenever your policy is up for renewal. This practice helps ensure that you are getting the best available rates and coverage options.

Increase your deductible

Increasing your deductible is a great way to reduce your insurance costs. A deductible is the amount you pay out of pocket before your insurance company covers the rest. For example, if you have a $500 deductible and your car sustains $3000 worth of damage, you will pay the first $500 and your insurer will cover the remaining $2500.

The higher your deductible, the lower your premium will be. This is because you are assuming more of the financial risk, meaning the insurance company will have to pay out less in the event of a claim. For example, increasing your deductible from $200 to $500 could reduce your collision and comprehensive coverage costs by 15-30%. Moving to a $1000 deductible could save you 40% or more.

However, it is important to note that this also means you will have to pay more if you do need to claim. Therefore, it is recommended that you have enough money set aside to cover the higher deductible if needed. You should also consider how often you are likely to make a claim. If you are a safe driver who spends little time on the road, a higher deductible may be a good option.

Additionally, the savings you make by increasing your deductible may not be as much as you anticipate. The relationship between deductible and premium is not direct or proportional, so be sure to do the calculations before making any changes.

Improve your credit score

Improving your credit score takes time and effort, but there are several ways to do it. Here are some tips to help you improve your credit score:

• Pay your bills on time: Payment history is one of the most important factors in determining your credit score. Late or missed payments can negatively impact your score, so it's important to pay your debts on time and in full whenever possible. If you struggle with timely payments, consider setting up automatic payments or using alerts to remind you when a payment is due.
• Maintain a low credit utilisation rate: Your credit utilisation rate is the amount of revolving credit you're using divided by your total available credit. Lenders generally view a credit utilisation rate of 30% or lower favourably. You can reduce your credit utilisation rate by spending less, increasing your credit limit, or paying off your balances more frequently throughout the month.
• Limit new credit applications: Each new credit application results in a hard inquiry on your credit report, which can negatively impact your score. Hard inquiries remain on your report for up to two years. Instead of applying for new credit accounts, try to use your existing credit responsibly and maintain a good payment history.
• Keep old accounts open: Closing old credit accounts can shorten the length of your credit history, which is a factor in calculating your credit score. Even if you no longer use an account, consider keeping it open to demonstrate a longer credit history.
• Review your credit reports regularly: Check your credit reports from the three major credit bureaus (Equifax, Experian, and TransUnion) for any inaccuracies or signs of identity theft. Dispute any errors you find, and address any unpaid balances or accounts that have gone into collections.
• Build your credit file: If you have a thin credit file or no credit history at all, focus on building a solid credit foundation. You can do this by opening new accounts that report to the major credit bureaus, such as credit-builder loans, secured credit cards, or becoming an authorised user on someone else's credit card account.
• Add to your credit mix: Lenders like to see a variety of account types, including credit cards, student loans, mortgages, and other instalment loans. Adding different types of credit to your portfolio can improve your credit mix and potentially increase your score.
• Deal with collections accounts: If you have unpaid debts that have gone into collections, negotiate with the collection agency or dispute the debt if it is incorrect. Paying off collections accounts or having them removed from your credit report can significantly improve your score.
• Get credit for rent and utility payments: Services like Experian Boost allow you to add your on-time rent and utility payments to your credit report, which can positively impact your score.

Ask about discounts

Asking about discounts is one of the most effective ways to keep insurance bills low. Here are some of the most common types of discounts available:

Driver History Discounts

If you have a good driving record, you can often get a discount. This usually means having no accidents or traffic violations in the past three to five years. Some insurers also offer discounts for taking a defensive driving course.

Affiliation Discounts

Your job, school, or clubs you're associated with could help lower your insurance bill. For example, some insurers offer discounts for alumni of certain universities, members of professional organizations, or federal employees. Military personnel and veterans may also be eligible for discounts.

Vehicle-Related Features Discounts

If your car has safety features like anti-lock brakes or airbags, you may be able to get a discount. Insurers may also offer discounts for newer cars or cars with alternative energy sources, like electric vehicles. Anti-theft devices can also help lower your insurance rates.

Personal Traits Discounts

Good students can often get a discount if they maintain a certain grade point average (usually a B or higher). Additionally, if you own a home, you may be eligible for a discount, even if you don't buy homeowners insurance from your auto insurer.

Customer Loyalty Discounts

Insurers often reward loyal customers with discounts. This could include discounts for longtime customers or those who have multiple policies or cars insured under the same policy. However, be cautious of insurers that use price optimization to charge loyal customers higher rates.

Policy-Related Discounts

You can often get a discount for paying your premium in full upfront or setting up automatic payments. Some insurers also offer discounts for getting a quote before your current policy expires or switching to electronic statements.

Drop insurance you don't need

One way to keep insurance bills low is to drop insurance coverages that you don't need. Here are some tips on how to do that:

• Review your current insurance policies: Take a close look at your current insurance policies and identify any coverages that you no longer need or are redundant. For example, if you have a car insurance policy that includes rental car coverage, but you rarely rent cars, you may consider dropping that coverage.
• Assess your risks: Evaluate the risks that you are insuring against and determine if there are any that you can self-insure or manage without insurance. For example, if you have a high deductible on your health insurance and rarely visit the doctor, you may consider dropping your coverage for routine check-ups.
• Compare prices and coverages: Shop around and compare prices and coverages from different insurance providers. You may find that you can get a better deal on your current coverages by switching to a different insurance company.
• Consider raising your deductible: If you have a low deductible on your insurance policy, consider raising it to lower your premiums. Just make sure that you have enough savings to cover the higher deductible in the event of a claim.
• Review your policy limits: Check your policy limits and make sure they are appropriate for your needs. If you have more coverage than you need, you may be paying more in premiums than necessary.
• Drop unnecessary add-ons: Some insurance policies include add-ons or optional coverages that you may not need. Review your policy carefully and consider dropping any add-ons that you don't require.
• Seek advice from an independent insurance agent: Consider consulting an independent insurance agent who can help you review your policies and identify any coverages that you can drop. They can also provide advice on alternative options or ways to reduce your premiums.

Frequently asked questions