Getting insurance can feel like trying to choose the lesser of two evils.
Not having enough money available in the event of an emergency sounds TERRIFYING.
And paying some faceless corporation hundreds of dollars a month for coverage you won’t ever need doesn’t sound much better.
So what do you do?
Hopefully, by the end of this post you will be able to:
- Understand how much control you have when buying insurance
- Make changes to help lower insurance premiums offered to you
- Ask all the right questions to get the best affordable insurance possible.
Although there’s insurance for just about everything, today I’ll be focusing on the basics of Auto, Home, and Life insurance as examples.
Here are our all-time best tips for finding affordable insurance:
1. Know How Insurance Companies Pick Their Prices
Insurance plans are NOT created equal. In fact, insurance plans can be adjusted, bundled, and negotiated to be as unique as the people paying for them.
At first, the way agencies pick their prices can seem unfair and completely random. But there are methods to the madness! Allow me to break down exactly which factors impact cost for you.
- Type of Coverage Package: In other words, “comprehensive” vs “liability” vs “collision” coverage. All of these packages will come at drastically different prices because they offer drastically different services!
- Your Deductible: “Deductible” refers to a specific dollar amount you agree to pay out of pocket before your insurance plan takes over in the event of a crisis. The more you agree to be responsible for upfront, the cheaper your monthly premiums will be.
- The Policy Limits: Minimum auto coverage standards are decided on a state by state basis. But many drivers choose to buy more coverage for added protection. (Spoilers: More coverage costs more!)
- Where You Live: Not only does the state you live in determine minimum insurance coverage standards– the street you live on can impact how much an agency charges you. Some neighborhoods are “higher risk” than others.
- Your Credit Score: Just as with buying a car or house, a higher credit score helps you buy a better, more affordable insurance plan.
- Your Age and Driving History: Think of your driving history as a sort of second credit score for your auto insurance company; safe and experienced drivers will always pay less because they are “lower risk” than a young driver with several accidents on record.
- Your Car’s Age and Condition: The older a car is, the more it depreciates in value. A newer car will always cost more to insure because new cars are worth more in total. An older car can be insured at a discount.
- Type and Level of Coverage: Just like auto insurance, there are bare minimum house insurance plans and other plans with tons of bells and whistles. (Spoilers: The bare minimum is always the cheapest!)
- Your Deductible: The more you agree to be responsible for upfront, the cheaper your monthly premiums will be.
- Where You Live: This is especially true for home insurance. Some parts of the country are 10X more likely to suffer natural disasters like hurricanes, tornados, floods, and forest fires. Those homeowners won’t even have the same insurance options to choose from as someone in a low-risk area.
- Your Credit Score: A higher credit score helps you buy a better, more affordable insurance plan.
- Your Claims History: If you have had home insurance before and made any claims on that plan, your next insurance company will take that into consideration. The more claims you’ve made, the “higher risk” you are to a new agency.
- Lifestyle Choices That Are “Risk Factors”: Each agency is different and these risk factors (aka red flags) will vary greatly. But common ones include owning an aggressive breed of dog, a swimming pool, a large trampoline, etc.
- Your Home’s Age and Construction: UNLIKE auto insurance, owning an older house will actually increase the cost of home insurance. Older homes are likely to need regular maintenance and are often built with outdated materials that are difficult to replace.
- Type and Extent of Coverage: The most common options for Life insurance are “whole life” and “term” coverage. Term coverage plans are limited to a specific length of time and thus usually more affordable.
- Where You Live: Again, some states and neighborhoods are inherently “higher risk.”
- Your Family Medical History: Unfortunately, if your family medical history involves early death, addiction, and/or chronic illnesses you are going to be charged more for life insurance.
- Your Age and Health: Conditions like obesity, heart disease, or diabetes will drive up your life insurance cost. The good news is, you’re never too young or too healthy to get life insurance.
- Lifestyle Choices That Are “Risk Factors”: The complete list of risk factors will vary by agency, but these usually include smoking, owning a motorcycle, and owning a firearm to name a few.
2. Take Control Of Your Risk Factors
Notice something about everything listed above?
You cannot control your medical history, your age, or how “risky” your neighborhood happens to be. All of those things greatly affect how affordable most types of insurance will be for you.
But you CAN control just about everything else.
Drop Some Bad Habits
Maybe the task of buying Life insurance for the sake of your children is just the motivation you need to finally quit smoking.
Buying a fence for your backyard pool might be all it takes to cross that risk factor off your case.
See which “risk factors” you can easily change and don’t mind living without!
Improve Your Credit Score
There’s really no downside to this! As your credit score improves gradually over time, you can speak with your insurance company about changing the cost of your premiums accordingly.
Choose A Deductible You Can Live With
Always try to pick the highest deductible you can, but one you could actually pay for if necessary. This will always help drive down your monthly premiums.
Define Your Bare Minimum Coverage
For each type of insurance, take some time to list what specific coverage you must have. That way, you can opt out of anything beyond those must have’s and save yourself from overpaying.
3. More Questions = More Affordable Insurance
There are hundreds and hundreds of insurance companies to choose from–and each has a wide selection of specific plans.
Important Questions to Consider:
- Will bundling insurance plans save me money?
- Will an upcoming life event change the coverage I need?
- Can a qualified agent get me a better deal than signing up online by myself?
Don’t be afraid to ask a real person all of these questions and more.
You never know what’s possible until you ask!