By Joel Dansby on Jun 26, 2018
If you haven’t reviewed your insurance coverage in a while, you might be surprised with how many ways you can save costs. Here are three tips for lowering your insurance costs while improving your coverage in the coming year.
Is Your Deductible Costing or Saving You Money?
Buying auto insurance doesn’t have to be a complicated issue, but if you’re not paying attention, some of the seemingly small decisions that need to be made in structuring the right policy could end up costing you plenty over the long-run. Aside from the coverage components, such as the comprehensive and liability coverages, the big component that drives the pricing of auto insurance is the deductible – the amount of out-of-pocket expense you must cover before a claim is paid. The amount of your premium payment is based, in part, on the amount of your deductible. If you select a low deductible, you will pay a higher premium.
Many people are concerned with the possibility of having to come out-of-pocket with a lot of money to repair their car in the event of an accident, so they will choose a low deductible. While they may feel some level of comfort knowing they will not have to spend as much of their own money, they may be spending hundreds of dollars more to pay the additional premium costs. The better strategy for most people, especially if the car is older, is to select the highest deductible and then bank the difference in premium. Better to have that money accumulating in your own emergency fund than in some insurance company’s own investment portfolio.
Get Control of Your Homeowners Insurance
Unquestionably, the most perplexing part of buying a home, next to understanding the mortgage terms, is buying the right homeowner’s insurance coverage. Insurance companies use a variety o factors to determine your rates. A little preparation on your part can put you in control of the pricing process
Know what needs insuring: Determine if your home needs the complete coverage against all perils except natural disaster and war, or whether you think your home is not likely to be completely destroyed. If you have specific contents that need coverage make a video tape of your items.
Set your deductible: Your deductible is the biggest factor used to determine your rate. If you have built a good emergency account, opt for a higher deductible and save big on your premium.
Cover your future: Most policies will cover replacement costs. Make sure that coverage keeps pace with inflation. At a minimum opt for 120% of replacement costs
Protect yourself: Expect the unexpected. An umbrella liability policy is inexpensive and protects you from just about anything that occurs on your property.
Protect your family jewels: Although most standard policies protect your valuables, make sure your irreplacables are covered.
Lower Your Health Insurance Costs and Taxes at the Same Time
If you are considering individual health insurance options, or your employer is evaluating its options, you may want to make a push for a fast-growing alternative that can lower both your health insurance cost and your tax bill. Health Savings Accounts (HSA), are becoming increasingly popular for people who want to gain more control over the health costs. HSAs are accounts that act similarly to IRA which allow you to contribute funds, up to $3,400 per individual or $6,750 per family, on a before-tax basis and have them accumulate tax deferred. HSA funds can then be used to pay for all eligible medical costs and those that aren’t used can be rolled into the next year.
In order to qualify as an HSA, it must be accompanied by a high deductible health insurance plan (HDHP). HDHP, as the name implies, are insurance plans that require a high deductible to be paid before benefits kick in. The deductible amount can range from $4000 to $10000, but the premiums are very low. The good news is that your deductible payments can be paid from your HSA funds. For many people, the savings in monthly premiums are simply plowed into the HSA.
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2023 Advisor Websites.