Whether we like it or not, we all carry risks with us throughout our daily lives. We carry with us the risks of death, disability, accident, lawsuit, “acts of God”, and many others. Some of these we can live with, some we can minimize, and some we can insure against. Here are 5 action steps you can take today to lower the costs of your insurance and/or the probability of needing to report a claim.
1. Shop around. Insurance is an intangible product in that you often don’t know what you have, what’s defective, and what works with your policy until you must file a claim. As a result, it can be difficult to compare products and prices when you’re in the marketplace. We recommend finding an insurance broker/independent agent who can shop around for you and will explain everything about your policy to you. If it’s been several years since you got your policies, we recommend getting a new review done because agencies will periodically raise rates and you could be getting a much better deal elsewhere. You want to make sure that the insurer your work with has good ratings. The best insurance rating company out there is A. M. Best. They’ve been rating the success of insurance providers for over a hundred years. Research the insurers you’re considering working with at their website here.
2. Know what’s in your policy. Insurance contracts can be difficult to read unless you’re an agent yourself, you’re a lawyer, or for some other reason you have a proficiency in legal gibberish. Insurance terms can sometimes have different meanings than you would suspect so if you don’t understand something, ask your agent or research it online. You want to know what’s covered under your policy.
3. Buy what you need. Some people are over-insured and others are under-insured. How can you buy just the right amount of insurance that is perfect for you? This answer will be different for everyone, but generally you want to consider the cost of the premium, the cost of the deductible, and the cost of a total loss if you had no policy. If it costs you $700 a year to insure a $250,000 house, then it’s worth it, however if it costs you $300 a month for a maximum pet health coverage of $4,000 a year, you might be better off self-insuring that risk.
4. Minimize risks. A key way to lower your premiums or the necessity of insurance altogether would be to minimize your risks. You can take proactive steps such as installing fire alarms and security systems, cleaning your gutters, and installing a fence to lower your homeowner’s insurance. You can lower both your life and health insurance premiums by quitting smoking, exercising regularly, and foregoing riskier activities like skydiving and scuba diving. And of course, we all know you can lower your automobile insurance through better driving safety practices and avoiding traffic violations.
5. Get an “Umbrella” policy. A personal liability umbrella policy is an inexpensive additional policy that can be added to your homeowners and auto policies to protect you in the case of a personal liability lawsuit. If someone is injured on your property or you caused damage through an accident, the plaintiff can win a suit against you if they can prove you were negligent. A million-dollar PLUP (personal liability umbrella policy) will protect you in these cases and can be obtained generally for under $200 a year.
Do you need help with formulating a risk management plan for yourself or your family? As fiduciary advisers, this is part of our comprehensive financial planning service. Contact us today to schedule a free appointment to discuss your insurance and financial goals.