Insurance is neither good nor bad, moral nor immoral. However, when we become so fearful of the future or of potential loss that we overspend on insurance, it consumes money that should be going to other family needs. This not only represents poor stewardship; it also shows a lack of trust in God and in His provision.
Money saving tips
The following are some suggestions that will help you save money on insurance. By following these simple suggestions you can maintain satisfactory insurance coverage while staying within the suggested percentage guidelines for insurance in your budget.
- Accidental death insurance. Dont pay extra for accidental death travel insurance. Statistically, it is highly unlikely you will die in an accident, and even if you do your basic life insurance should be sufficient, especially policies that give double indemnity for accidental death.
- Basic insurance. Make sure you have adequate coverage but not excessive coverage. Remember that by accepting higher deductibles you can afford better coverage.
- Vehicle collision insurance. Eliminate collision insurance on all older vehiclesvehicles worth less than $2,500or on vehicles for which annual collision insurance costs more than the wholesale value of the vehicle. However, never drive without liability coverage.
- Commute by carpool. Many insurance companies offer discounts to low-mileage drivers or to drivers who use their vehicles to carpool.
- Company ratings. Make sure that your insurance company has a rating of B+ or higher.
- Deductibles. If you maintain collision coverage, increase the deductible. Doubling your deductible should dramatically lower your premiums. However, make sure that you have saved in an interest-bearing emergency savings account an amount equal to your deductible.
- Discounts. Many states offer significant discounts to drivers who complete a defensive driving course. Contact your insurance agent to inquire about any discount offered by your state.
- Document household property with a video recording. Videotape your home inside and outside for insurance records. In case of a fire, you will need evidence of expensive wall coverings, window coverings, expensive paintings, books, and collectibles. While taping, describe aloud the property, effects, goods, collectibles, and holdings in detail. Keep a dated copy of the tape in a safe-deposit box. Make a new video every five yearsafter considerable changes have been made or after expensive purchases have been made.
- Dont make small claims. Too many claims could lead to policy cancellation or premium increases.
- Extended warranty coverage. As a general rule, extended warranty coverage is an unnecessary waste of money. Most modern day appliances come with a warranty that covers items for the first 90-days to three years. It would be better to take the money that an extended warranty would cost and place it in an interest-bearing savings account to cover needed expenses after the initial warranty has expired.
- Health insurance. If you are not covered by company insurance, shop health insurance coverage regularly. With many companies, the first-year premium is much less, so switching might not be a bad idea. If your employer provides insurance and offers a menu of coverage, check all the options carefully and determine which is best for you and your family. Never cancel one coverage until you have another fully in place. If you cannot afford full medical coverage for each family member, consider school accident insurance offered to each child at the beginning of each school year. This is excellent insurance and typically pays 85 percent of medical and dental bills. Most plans offer 24 hours a day, anyplace-in-the-world coverage.
- Homeowners insurance. Ask your insurance agent about homeowners insurance discounts for fire and smoke alarms, security systems, radon detectors, natural/bottled gas detectors, and fire extinguishers. If discounts are offered, install the alarms and systems.
- Liability umbrella policy. Rather than buying individual liability policies to cover single automobiles, student drivers, or residence, consider buying a $1 million liability umbrella policy that will cover all vehicles and the principal residence.
- Life insurance. Dont buy life insurance for younger children. Insure only wage earners that contribute to the support of the family, stay-at-home moms, or older dependent children who still live at home but who help support themselves. Either drop or cut back on life insurance coverage as your dependents become independent.
- Mortgage insurance. This is not private mortgage insurance (PMI), which is generally required to protect a lender against default by a buyer if the buyers down payment is less than 20 percent. Mortgage insurance is like life insurance, because it pays off your remaining mortgage in case of your demise. It is typically overpriced. It is far better to buy enough term insurance to cover your home mortgage in case of your death.
- Pay annually. If possible, pay insurance premiums annually. Avoid the monthly, quarterly, or semi-annual billing and service charges.
- Private mortgage insurance (PMI). In most situations, PMI can be canceled when equity in the home reaches 20 percent, either by paying down the mortgage or the property appreciating in value. However, it will not happen automatically. You must initiate and expedite the process.
- Rate reduction. Let your auto insurance agent know of any changes in your driving practices, such as carpooling to work or no longer commuting to work. Both of these will lower your auto insurance premiums.
- Renters insurance. If you rent, buy a renters policy. Landlords are not responsible for renters belongings; nor does a landlords homeowners insurance cover renters personal property.
- Replacement value. Add a replacement cost rider to homeowners or renters insurance. Without it, insurance companies will depreciate the value of every applicable item.
- Singles. If you are single, buy life insurance only if someone is financially dependent on you and would suffer financial hardship if your income suddenly disappeared.
- Insurance offerings. Never buy insurance from television or direct mail ads. Some charge as much as 400 percent higher than conventional insurance coverage, and the numerous exclusions generally disqualify the majority of all claims.
Although insurance coverage is a must in our society, we cannot protect ourselves and our families from every possible contingency. Nevertheless, we must safeguard our families against loss or potential financial ruin. Insurance offers that safeguard. Yet the misuse of insurance and buying more than what is needed is a waste of family resources and can lead to dependence on insurance, instead of on God.