Paying your insurance premiums so you have protection when you need it = a great idea. Not overpaying for that protection is an even better one.
Doesn’t everyone pay the same premium?
Nope. When an insurance company agrees to cover you, they calculate how likely you are to actually need their help one day. That process is called underwriting. The higher the likelihood they’ll have to spend money on you, the more they’ll charge.
Related: Insurance Terms, Skimm’d
They use personal stats – like your age, gender, job, credit score, where you live, and any insurance claims you’ve made in the past – to set your premium. In some cases, they’ll also look at policy-specific stuff. Example: a car insurer will consider your driving record, how many miles you typically drive each year, and the type of car you have.
Got it. So how do I pay as little as possible?
Glad you asked. Here are some ideas:
Shop around. Each insurance company uses slightly different math to determine your risk. Get free quotes from a few reputable providers before you pick one. Note: group insurance (like the kind you might be able to get through your work or union) is usually cheaper than an individual policy because the risk is spread out among more people.
Tap an expert. Independent insurance agents can help you pull quotes from a bunch of providers at once to find the right deal. Just make sure to do your own research about what they recommend. Since most insurance agents are paid on commission (and certain policies come with bigger commissions), it’s important to confirm that anything you sign up for is a good fit for your needs.
Re-read your policy. If you didn’t read the terms, conditions or fine print when you signed on the dotted line, today is a great day to make sure you’re not paying for any coverage you don’t need. Like rental car reimbursement if you’re a two-car fam.
Bundle up. Some companies will reward you with lower premiums if you make them your one-stop-shop for all your insurance needs.
Pay another way. Paying for a whole year vs. monthly or quarterly and/or enrolling in auto-pay could get you a discount. Call your insurance company to find out which payment methods they incentivize.
Raise the deductible. That’s how much you pay out of pocket before your insurer chips in. Increasing your deductible = less risk for your insurance company and lower premiums for you. But it could also mean a more expensive bill down the line. Before trying out this move, make sure you can afford to pay a higher deductible if something goes wrong. Hint: a stocked emergency fund can help.
Ask for discounts. You’ll never know what you could qualify for until you do.
A lot of personal factors you can’t control impact what you pay for insurance. But shopping around, bundling your policies, signing up for auto-pay, and asking to spend less? That’s on you.