Tip #9 – Negotiate Your Home and Auto Insurance

Welcome to day nine of our roughly 10-day journey, where we are looking at 10 money-saving tips to help save $10,000!   This has been a really fun series of posts and it’s garnered a lot of great comments!  Keep ‘em coming everyone!

If you missed the introductory post of 10 Money-Savings Tips to Help You Stash $10,000 you’ll definitely want to check it out so we’re all on the same page.

But to sum it up – here’s our mission:

• The Goal: Save $10,000
• By When: This time next year
• How: By implementing 10 money-saving tips

For the last couple weeks we’ve looked at one money-saving tip each Monday through Thursday.  We’ll be finishing up our series this week!

If you have a tip that hasn’t been mentioned, or you’d like to add some additional thoughts to one of our existing tips, please let me know your best money-saving tip here!

We’d love to hear your stories of what you did and how much money you saved by implementing your tip!  If you’re a blogger and have posted about your money-saving tip, please include a link to your post!

Here’s what we’ve been through so far:

Tip #9: Negotiate Your Home and Auto Insurance

This is one tip that most people have probably thought of, but perhaps haven’t paid much attention to.  For whatever reason, we all get into a rut and so when our renewal notice comes we just pay the premium and on we go for another six months.

For many of us, the thought of getting auto insurance quotes and home insurance quotes isn’t all that appealling right?  So what do we do with things that aren’t that fun?  C’mon now, be honest – we put them off!  

 But, this is one area that you can really save some big money with a little front-end effort of getting some quotes!

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How Much Coverage Do You Need?

Before you get carried away and start raising your deductible and dropping coverage, you really need to do a little homework up front to figure out how much coverage you actually need.

Smart Money has a great article on auto insurance that walks you through the different options for your auto insurance and gives an idea of how much coverage you should be looking for.

Shop Around For Home and Auto Insurance Quotes

Ok, now for the fun part.  Before you give your existing company a call, you’ll want to give competitor’s a call and start comparing insurance quotes.  You’ll also want to check to see if your employer offers any discounts with certain carriers.  If you’re a Costco member, you get a discount as well. 

Make sure you know all the angles – most companies will offer you big discounts for buying both home and auto insurance – among other things through them!

Get as much information as you can and write it down.  You want to make sure you’re comparing apples to apples.  To help get you started here are some toll-free numbers to call so you can shop around:

Geico: 1-800-861-8380

AAA: (866) 539-8033

Allstate: 866 704 9900

Progressive: 1-800-776-4737

Or, you can always go on the web and get some free auto and home insurance quotes as well.

Simple Financial Lifestyle mentioned they recently shopped their car insurance and ended up saving $500 annually!  There’s some great potential savings because this type of insurance is very competitive – and companies want your business!

Call to Negotiate

Once you’ve got a pretty good idea as to what other companies will offer, you want to give your existing company a call first. 

Let them know that you’ve got a quote for “X” amount and you’re wondering what they can do to retain your business.  This works!  It’s amazing how many companies scramble to throw you a deal when they realize you’re about to walk.

There are some crazy discounts offered by the competition these days – ask your current company if there are any discounts you’ve been missing out on, like a safe driver discount, or a “I haven’t had a cold in two years” discount.  Anything!

If your existing company can’t match or beat the lowest price you shopped around for then it’s time to switch.  Yes it’s a pain, but it’s worth it.

Side Note: I don’t advocate going by price alone – you want to make sure you are with a legitimate company that has good claims-paying ability!  The last thing you want is to get into an accident and have a company that can’t pay!

Estimated Savings: $25-$100 per month

Don’t Forget To:

1. Check out the other money-saving tips in this series!

2. Leave a comment below letting us know how much you’ve saved by negotiating your home and auto insurance!

Check Out All The Tips From Our Series

Tip #1: Cut Back on Going Out to Eat

Tip #2: Evaluate Your Entertainment

Tip #3: Cut Your Cable

Tip #4: Turn Your Heat Down

Tip #5: Negotiate Your Cell Phone Plan

Tip #6: Get Rid of Your Land Line

Tip #7: Slash Your Grocery Bill by Cutting Out Junk Food!

Tip #8: Use Coupons, For Everything!

Tip #9: Negotiate Your Home and Auto Insurance

Tip #10: Start Packing Lunches!

Oh great – a post about life insurance – doesn’t he know I’m not interested in reading about life insurance?

Is there anything people hate thinking about, talking about and paying for more than life insurance? 

A necessary evil if you will.

It just feels like a waste – I mean what benefit do you receive from having it?  Abolutely nothing – only your heirs get to see that. 

At least if you need other forms of insurance you can realize something tangible like health or a fixed vehicle or something!

But we all know that we need it – or at the very least, we need to talk about it and come to an informed decision regarding it.

So, when you’re about to make the plunge and start looking at life insurance for the very first time or you are re-evaluating your current situation - answer these four questions before you pay that premium!

1. What’s the purpose of my life insurance

Are you serious?  The purpose of my life insurance?  Isn’t it to pay someone when I die? 

Sort of. 

What I mean by purpose of life insurance is what exactlly are you using it for.  Here’s some examples:

• To provide my spouse with income for life
• To create funds for my children to go to college
• To pay off my mortgage
• To pay estate taxes and minimize the erosion of my estate
• To pay off other debt
• To bury me

As you can see there are multiple purposes for your life insurance and you may have more than one.  

It’s vital to understand why you are buying the life insurance in the first place.

2. How much insurance do I currently have

You might have a million dollars through your group insurance at work and think that you’re good to go.

Wait!  Not so fast – think about it for a second.  If that’s the only insurance you have what about if you lost your job, quit or retired?  What happens to all that insurance?

In most cases it disappears – so do you really have that coverage? 

Yes and no.

You do have coverage, but it’s temporary.  So you need to evaluate how much you have and what kind of insurance you have as well – term, permament or group.

3. How much life insurance do I need

There are countless calculator’s on the web you can use to determine your life insurance needs.  

The amount of insurance you need will vary depending upon what your purpose for the insurance is. 

If you are trying to provide for your spouse for the next 20 years then you’ll probably need more than someone only worried about having enough to bury themselves and pay off some outstanding liabilities.

There’s no hard or fast rule regarding how much you need, but here’s a handy guide from LIFE (Life and Health Insurance Foundation for Education):

4. What kind of life insurance policy should I buy?

Yes, Suze Orman will tell you to only by term insurance.  Others will tell you to only buy permanent (also known as whole life, universal life or variable universal life).

But what kind do you really need?

The answer is it depends.  It depends on the purpose for your insurance and how long you want it to last you.

If you’re concerned about using life insurance for estate planning purposes you probably need something more than term insurance.

If you’re only concerned about protecting your life for 20 years until the kids go off to college then a term product is proably right for you.

Don’t let people tell you that only one type of insurance is right for everyone.  There is no one size fits all!

The bottom line with life insurance

Identify the purpose of the life insurance, do your homework, shop around and do what’s best for your situation.

What about you? What other questions should you ask before you buy life insurance?

If you haven’t yet, consider staying current with Redeeming Riches by receiving my posts FREE through email or RSS Feeds here.  Also, follow me on Twitter here.

Wouldn’t you agree that it seems like everyone is offering some sort of Accidental Death insurance these days?

From mortgage companies to credit card issuers to banks and employers – everyone is in on these types of plans.

There can be a lot of confusion, however, around Accidental Death & Dismemberment insurance, also known as AD&D.

But just because costs are low doesn’t mean you should be so quick to sign up!

Understanding exactly what an AD&D policy is and what it covers will help you determine if you should buy into one of these plans.

What Is AD&D?

AD&D is NOT standard life insurance!

An Accidental Death & Dismemberment policy is exactly what it sounds like.

It’s an insurance plan that gives money to the beneficiary of someone whose cause of death is a non-work-related accident.

It also provides fractional benefits for a loss of limbs, fingers, eyesight etc. The parts of the body and benefits for each vary with each policy.

Generally speaking, the premiums on these policies are pretty inexpensive relative to the benefit that would be paid out.

When Does It Pay Benefits?

Generally speaking, the policy will pay full benefits in the event of an accidental death and will pay a portion of benefits for the loss of a body part.  See Unum’s example:

As you can see, Unum defines “accidental death” as “the loss of life caused soley by external, violent, and accidental means and not contributed to by any other cause.

What to Watch Out For

Let’s say you have a $250,000 AD&D policy.  Will your insurance carrier pay your spouse if you’re on your way to work and suddenly have a heart attack, head into oncoming traffic and die in an accident?

The answer is no.  Although the death was accidental, the cause was the heart attack, which is a natural cause.

Now, let’s say your spouse was hit head on in an accident, sustained injuries and passed away four months later due to head trauma from the accident – will you receive benefits?

The answer is: very unlikely.  Most policies have provisions that state you must die within a certain period of time and that it must be directly caused by the accident etc.  Four months is many times too long of a time period.

Who Should Buy These Policies?

Even though the costs are low, the odds of one of these policies paying out is extremely low.  According to Insure.com, in 2005 117,809 people died from unintentional injuries.

Now, if your employer offers AD&D as an additional benefit without cost on their group plans then by all means sign up for it – you’ve got nothing to lose at that point.

If you travel a lot for your job or you have a long commute to and from work every day then you may want to consider getting the most you can from an AD&D policy.  The odds of an accident are higher for you.

In general, however, most people do not need the added expense of an AD&D policy.

If you are looking for additional coverage and think this is a cheaper way to insure yourself, you’d be better off spending a few extra bucks and applying for an inexpensive individual term policy.

May is National Disability Awareness Month.  My guess is you didn’t even know there was such a thing.  To be honest, I didn’t either until a few weeks ago.  It seems like everything is getting its own awareness month these days doesn’t it?

I thought this would be a good time to roll out a blog series called Informed, in which I will try to provide some clarity on a variety of financial planning concepts every now and then.  I know, I know, it sounds fascinating and you can’t wait to come back!

What is Disability Insurance?

Disability insurance is one of the most misunderstood and often overlooked forms of insurance in the marketplace today.  In its simplest form, it offers income replacement to an individual who is unable to work.

If you were to get sick or hurt for a period of time, disability insurance would replace a portion of your income.  Benefits are generally taxable if you have a group policy through your employer and typically non-taxable if you own an individual policy

Who Needs It?

The Social Security Administration estimates in their December 31, 2007 fact sheet that seventy percent of the private sector workforce has no long-term disability insurance. A person’s ability to earn an income is usually their most important financial asset, so basically anyone who depends on earned income should probably consider this type of insurance.

How Much Do I Need?

That depends on a few things like how much income do you currently earn, how much are your fixed expenses each month and do you have any other disability insurance in place. Here’s a handy calculator that shows your potential need for insurance.

It Won’t Happent to Me

Consider these statistics:
• Someone who is 35 years old has a 50 percent chance of disability for 90 days or more before they turn 65.
• Most people in the U.S. are better prepared financially in case of death (usually with life insurance) than if they get disabled, even though the chances are at least three to five times greater (depending on age) that a disability will occur.
• Upwards of 375,000 Americans become totally disabled every year.
• Approximately one out of seven people who are between the ages 35–65 can expect to become disabled for five years or longer.
• Almost 30 percent of the people who are between the ages 35 and 65 will experience a disability that lasts at least 90 days during their working careers.

What Should I Do?

The first thing to do is check with your current employer to see if you are covered through work. Secondly, if you do have group coverage, find out if you can increase your coverage. And lastly, shop around to get a price on individual policies to see if it works into your budget and makes sense for you financially.

Real Life Example

I remember talking to my friend and former coworker Kent Eloe, who said he was so glad he bought disability insurance before he found out he had brain cancer. Many of us think, “it’ll never happen to me” and that might be true, however, the question that should be asked is “what if it does?”. See more of Kent’s amazing life story here.

Theological Considerations

I hope to take a deeper look at the spiritual consideration of insurance and financial planning in a later post. I do want to briefly mention that as Christians, our hope does not lie in any amount of insurance coverage or financial planning. Our hope lies in the Sovereign Creator of this world, our Father God who cares for and loves his children and promises to provide for their needs. We must be prudent in our planning, but ultimately we entrust our care to Him.