Eight Rules For Saving Money When You Buy Insurance

Eight Rules For Saving Money When You Buy Insurance



Eight Rules for Saving Money When you​ Buy Insurance
By following the​ eight rules explained here,​ you​ can save money,​ and​ just as​ important,​ you​ can save yourself from making serious mistakes when you​ shop for and​ acquire insurance policies.
Rule 1 Buy Insurance Only for Financial Risks you​ Can’t Afford to​ Bear on​ Your Own
The purpose of​ insurance is​ to​ cover catastrophes that would devastate you​ or​ your family .​

Don’t treat insurance as​ a​ chance to​ cover all your losses no matter how small or​ insignificant,​ because if​ ​ you​ do you’ll fritter away money on​ insurance you​ really don’t need .​

For example,​ if​ ​ your house caught fire and​ burned down,​ you​ would be glad you​ had homeowner’s insurance .​

Homeowner’s insurance is​ worth having,​ because you​ likely can’t—and you​ certainly don’t want to—cover the​ cost of​ rebuilding a​ house .​

On the​ other hand,​ insuring an​ old clunker is​ a​ waste of​ money if​ ​ the​ car is​ only worth $800 .​

You would be throwing away money for something you​ could cover yourself if​ ​ you​ had to.
Rule 2 Buy from Insurers Rated a​ or​ Better by A.M .​

Best
Insurance companies go bust,​ they are bought and​ sold,​ and​ they suffer the​ same economic travails that all companies do .​

Between 1989 and​ 1993,​ 143 insurance companies declared bankruptcy .​

You want to​ pick a​ reliable company with a​ good track record.
A.M .​

Best is​ an​ insurance company monitoring service that rates insurance companies on​ reliability .​

Look for insurers rated a​ or​ better by A.M .​

Best,​ and​ periodically check to​ see whether your insurer is​ maintaining its high rating .​

if ​ your insurer goes down a​ notch,​ consider finding a​ new insurance company .​

You can probably get A.M .​

Best’s directory of​ insurance companies at​ ​ your local public library,​ and​ you​ can find A.M .​

Best on​ the​ Web at​ ​ www.ambest.com.
Rule 3 Shop Around
There are many,​ many,​ many kinds of​ insurance policies,​ and​ insurers don’t advertise by price .​

You need to​ do some legwork to​ match your needs with the​ cheapest possible policy .​

Talk to​ at​ ​ least two brokers to​ start with .​

Look for noload insurance companies—companies that sell policies directly to​ the​ public without a​ broker taking a​ commission—since they usually offer cheaper prices.
Rule 4 Never Lie on​ a​ Policy Application
If you​ fib and​ get caught,​ the​ company can cancel your policy .​

if ​ you​ lie on​ an​ application for life insurance and​ die during the​ first three years you​ hold the​ policy,​ the​ company will cancel your policy,​ and​ your beneficiaries will receive nothing .​

Health,​ life,​ and​ disability insurers run background checks on​ applicants through the​ Medical Information Bureau,​ so you​ can get caught lying .​

The medical examination you​ take for life insurance can also turn up a​ lie .​

For example,​ if​ ​ you​ smoked tobacco in​ the​ previous year,​ it​ will come up in​ the​ test.
Rule 5 Don’t Buy SpecificRisk Policies—Buy General Policies Instead
When it​ comes to​ insurance,​ you​ want the​ broadest coverage you​ can get .​

Buying insurance against cancer or​ an​ uninsured motorist defeats the​ purpose of​ having an​ insurance policy .​

if ​ you​ have ulcers,​ your cancer insurance will not help you​ .​

Get comprehensive medical coverage instead.
Uninsured motorist insurance is​ supposed to​ protect you​ if​ ​ you​ get hit by someone who doesn’t have car insurance or​ doesn’t have adequate car insurance .​

But,​ in​ my opinion,​ you​ don’t need it​ if​ ​ you​ have adequate car insurance yourself,​ as​ well as​ health,​ disability,​ and​ life insurance .​

I ​ should point out that some attorneys advise you​ to​ carry uninsured motorist insurance because,​ by doing so,​ you​ may be able to​ recover damages for pain and​ suffering.
Rule 6 Never Cancel One Policy until you​ Have a​ Replacement Policy in​ Place
If you​ cancel a​ policy without getting a​ replacement,​ you​ will be uninsured for however long it​ takes to​ get a​ new policy .​

And if​ ​ disaster strikes during this period,​ you​ could be financially devastated .​

This rule goes for everyone,​ but especially for people getting on​ in​ years,​ since older folks sometimes have trouble getting health and​ life insurance.
Rule 7 Get a​ High Deductible
You save money by having insurance policies with high deductibles .​

The premium for highdeductible policies is​ always lower .​

Not only that,​ but you​ save yourself all the​ trouble of​ filing a​ claim and​ needing to​ haggle with insurance company representatives if​ ​ you​ have a​ high deductible and​ you​ don’t need to​ make as​ many claims.
People who buy lowdeductible policies usually do so because they want to​ be covered under all circumstances .​

But the​ cost,​ for example,​ of​ a​ $400 fenderbender is​ usually worth paying out of​ your own pocket when compared to​ the​ overall cost of​ being insured for $400 accidents .​

Statistics show that most people have a​ fenderbender once every ten years .​

The $400 hurts to​ pay,​ but the​ cost of​ insuring yourself for such accidents over a​ tenyear period comes to​ far more than $400.
One other thing if​ ​ you​ have a​ low deductible,​ you​ will make more claims .​

That means you​ become an​ expensive headache for the​ insurance company .​

That means your rates will go up,​ and​ you​ don’t want that to​ happen.
Rule 8 Use the​ Money you​ Save on​ Insurance Payments to​ Beef Up Your Rainy Day Account
While you​ can save money on​ your insurance premiums by following the​ rules mentioned earlier,​ it’s probably a​ big mistake to​ use that money for,​ say,​ a​ trip to​ Hawaii .​

Instead,​ use any savings to​ build a​ nicesized rainy day fund that you​ can draw on​ to​ pay deductibles .​

a​ big enough rainy day fund can cover both periods of​ unemployment and​ your insurance deductibles.




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