One thing that no one can afford to be without is insurance. You might roll the dice and go without it. But the odds are that sooner or later you will encounter a serious life circumstance that you cannot afford.
Insurance is the way to transfer your risk of financial loss to an insurance company. Even though you might dislike paying the bills now, it can save our finances in the long run. Just because insurance is important, though, doesn't mean the premiums need to break your "piggy bank." There are ways to protect yourself from large financial losses at a more reasonable cost.
Have an Emergency Savings Fund - Building an emergency savings fund is the first step toward saving money on insurance. Your savings can cover smaller losses and allow you to increase your deductible.
Insure Against Large Losses - Insurance coverage for small losses is very expensive. I might be able to insure my dishes against breakage. But the premium would be extremely expensive. So, we use our savings fund to replace broken dishes and instead purchase fire insurance for our house. Losing all our possessions in a house fire would be more than even a strong savings fund could endure. The same principal applies to other types of insurance. Purchase insurance for the broad/comprehensive losses, rather than for the smaller things that might happen.
Raise Your Deductibles - The premium on a policy with a $1,000 deductible costs much less than a policy with a $250 deductible. If you have an emergency fund that can cover the higher deductible, choose the larger amount to save money on your premium.
Comparison Shop - Insurance premiums vary significantly from company to company. While price should not be your only concern, you can save money by being willing to switch.
Ask About Discounts - Companies offer discounts for multiple policies at the same company, safety precautions, group membership, and more.
Maintain a Good Credit Record - Insurance companies unfortunately do charge more if you have a poor credit record. Taking steps to improve your credit score can ultimately reduce your premiums.
Do Not Make Unnecessary Claims - Frequent claims can cause cancellation of your policy or an increase in your premiums.
Avoid Certain Types of Insurance - Some types of insurance offer less value for your premium dollar. People who purchase credit life or credit disability insurance, insurance for specific diseases, accident insurance, and other very specific policies might lose benefits because of narrow policy definitions. Broader/more comprehensive coverage usually provides more for your insurance money.
If you would like to learn more about insurance, contact us for information about our Managing Your Money series, which is offered continually in localities throughout the Northern Shenandoah Valley.
Call me at 540-459-6140, e-mail me at firstname.lastname@example.org, or call your local office of Virginia Cooperative Extension. You can download a copy of the registration flyer at the following url: http://offices.ext.vt.edu/shenandoah/programs/fcs/Files/Managing_Your_Money_Series_Summer_2011_Flyer.pdf.