Many businesses and individuals are talking about insurance; unfortunately, the discussion topic is the rising costs. There’s a multitude of reasons why lines of insurance are increasing so rapidly in recent years. Instead of arguing the cause, I want to present ideas on how to deal with the effect. The following are some ideas to help reduce the premium costs for your insurance products.
I present these ideas with the premise that insurance companies don’t believe you’re purchasing a "maintenance policy." Many consumers have viewed their insurance policy like a warranty to handle the little dings, dents, and breakdowns; I can assure you the insurance industry doesn’t see your policy the same way. Most companies operate with an underwriting philosophy that "frequency breeds severity," which makes your decision in reporting claims very important in your overall insurance portfolio. Now to the savings:
- Deductibles. Since underwriters don’t want small claims, you might as well save the money on premiums. Insurance Services Office (ISO) has changed the standard homeowners’ deductible to $500 and most commercial property coverage forms have followed suit. If you have a large property line that creates higher premiums, you might even want to consider a $1,000 or $2,500 deductible. Your insurance professional can easily calculate the cost savings, which could allow you to recoup your savings within a few years if you go loss free. It can be very surprising what a large savings this creates. Again, I advise you to thoughtfully walk through the dialogue with your advisor.
The same is true of automobile deductibles. I recommend you carry no lower than $250 comprehensive and $500 collision. Most consumers’ largest concern in relationship to automobile insurance is a glass claim. Some companies even offer a zero glass deductible as an inexpensive buyback. The glass companies in central Illinois are very responsive and affordable if you choose to pay for the glass yourself. Again, the philosophy here is to reduce future price increases by paying the claims. If you have a whole fleet of vehicles that are on the road often, I would recommend establishing a fleet contract with a glass company to control costs.
- Improve Your Credit. Your ability to pay your bills on time and overall financial responsibility has become a major factor in how your insurance premiums are calculated. Companies aren’t allowed to discriminate based solely on insurance scoring, but it’s extremely important. Many factors are used to calculate this score, and each company weighs the factors differently. I recommend you order a personal credit report and make sure your information is accurate. If you operate a business, it would be wise to order a Dunn & Bradstreet. Many underwriters use the D&B to help their decision-making process. Many lines of credit can remain open after you’ve met your financial obligation but are still held against you as available credit. The "credit factor" is continuing to become higher on the underwriter’s list of importance when pricing your insurance.
- Life Insurance Shopping. In June, it was announced the mortality tables for pricing life insurance were changing for the first time since 1980. Due to the increase in life expectancy, many companies will begin to re-price their life insurance downward. The average man’s expected life span has gone from 70 to 74, while a female has increased from 77 to 79. Besides the good news of living longer, this will begin to have a dramatic impact on life insurance. This is another reason to purchase a good Medicare supplement and Long Term Care (LTC) policy.
These are just a few examples of some money saving techniques in this ever-changing insurance marketplace. Again, I encourage you to spend time with your trusted insurance professional reviewing the need for the coverages mentioned above and others that pertain to your specific business. Contact your advisor today to start saving money. IBI
