spend too much

6. Your car and home insurance.

Welcome to the Dad Cents, capsule no rx 10 ways to put money back into your budget without stopping the fun stuff, series. The countdown continues with the first of two articles about car and house insurance.

6. Your car and home insurance.

Can you really save 15% by switching to another insurance company?

Every insurance company works under the same premise; take in more money than they pay out! Come to think of it, every successful business I know, works in a similar fashion. One key to success for insurance companies is to spread their risk across the area they service, whether local or national, just like a wise investor.

By law, we must have liability insurance on our vehicles.  Furthermore, an insurance company mandated requirement exists for coverage on your home while you have a mortgage. Unfortunately, eliminating debt on our vehicles and home does not remove our requirement for insurance (once a house is debt free the requirement is removed but the financial and liability risks are much too high to cancel the policy). Chances are we probably will have insurance payments for the majority of our lives!

The huge question is, “Are you paying more than you need to for your coverage?” When I watch TV, every second or third commercial suggests an answer to this question. “You can save money by switching to our policy!”

I am very intrigued when I see this battle persisting when I know every insurance company is regulated in the same way; by the state in which they are licensed to operate. The state regulations also set the rules for what insurance companies can and cannot do! For example, all the companies have mandated reserves to cover pay outs when accidents or catastrophes occur.

However, if they are all treated similarly by law then how could one company say you can pay 15% less with their company?

The answer is: Their philosophy on local agents! Fifteen percent is roughly the cost of paying a neighborhood insurance agent to meet with and help policy holders. Most internet insurance companies do not have local agents, or if they do, the agents are very sparse. Even though some companies may have representatives in locations, their main contact points are either the internet or via phone.

I have several concerns with most families utilizing these types of companies. Car and home policies have many intricacies that can cause headaches and leave them underinsured. Here are a few thoughts to help you make a good decision.

Keys to making a good decision:

  1. Do you have a very good knowledge of insurance?
  2. Can you get the kind of personal service you desire?
  3. Have you had many claims in the past?
  4. Is the company financially sound?
  5. Check with your state insurance commissioner about track records of the companies. It is much easier to find out about customer service before you make a change rather than learning the hard way.

In the next article, I will talk about the importance of having the proper coverage and some considerations so you can get the best policy for your family!

Is it possible for everyone to use these ideas? Maybe, but I will make one promise. If you do not try, you will not save money!

Make sure also to watch for our next Savvy Dads webinar!


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Wednesday, June 22nd, 2011 Teaching 1 Comment