Slash Your Insurance Costs

Editor's note: This article is from the 2009 issue of Success With Your Money. Order your copy now.

AUTO INSURANCE

Boost your deductible. One of the easiest ways to reduce your auto-insurance rate is by raising your deductible. Boosting the deductible from $250 to $1,000, for example, can cut your premiums by 15% or more. And you'll be less likely to file small claims that could jeopardize a claims-free discount and lead to a rate hike.

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Trim your coverage. If your car is five years old or older, you may be paying more in premiums than you could possibly get back in claims. Consider dropping collision and comprehensive coverage, which could reduce your premium by 25% to 40%. A good rule of thumb: If your car is worth less than ten times the cost of the annual coverage, drop it. You can get a ballpark estimate of your car's value at www.kbb.org. (If you have an outstanding loan, your lender may require you to keep collision coverage.)

Shop around. Car-insurance prices can vary enormously by insurer -- it isn't unusual to find price differences of hundreds of dollars per year for the same family. And even if you shopped carefully a few years ago, you could benefit from assessing your options again, especially if you've experienced any life changes. The insurer that offered the best rate for a couple, for example, may have some of the highest rates for adding a teenage driver.

It's easy to get price quotes from several insurers at www.insweb.com or www.insurance.com. You can also check rates for a few insurers at their own Web sites, such as www.statefarm.com, www.progressive.com and www.allstate.com. Or you can find an independent agent who works with many companies and knows from experience which insurers are more likely to offer you the best deal (you can find an agent in your area through the Independent Insurance Agents & Brokers of America).

Get all the discounts you deserve. Auto-insurance companies offer a slew of discounts. Some may come automatically, such as a price break if you have several cars or multiple policies with the same insurer (maybe homeowners insurance and an umbrella policy as well as auto coverage). And having a good driving record -- no at-fault accidents or moving violations in the past three or five years -- may slash your premiums by up to 20%.

But you may not benefit from some other discounts unless you know to ask -- such as discounts for low mileage (often 7,500 or less per year) or carpooling, or a premium reduction when you retire. Some insurers even offer a discount for people age 55 or older who take a defensive-driving course. Ask your insurer for a full list of discounts and find out what you need to do to qualify.

Save money on teenage drivers. Good grades can have a big payoff-some companies shave as much as 30% off the premiums for a student who earns at least a B average. And some companies offer extra discounts for kids who participate in their own driver-safety courses (such as State Farm's Steer Clear program). Matching the kid with a safe car can also lower your premiums (check safety ratings at www.carsafety.org).

Also let the insurer know if your kid goes away to college without taking a car -- your rates could drop by as much as 30% if the school is at least 100 to 150 miles away from home, and the student would still be covered when home on summer or semester break.

It's generally a much better deal to keep your new driver on your own policy rather than buy a separate policy; many insurers won't even cover teenagers by themselves, and they'll benefit from a multipolicy and multicar discount on your policy, as well as any breaks you've accumulated for being a longtime customer.

HOMEOWNERS INSURANCE

Boost your deductible. Increasing it from $250 to $1,000 can lower your premium by as much as 25%; raising it from $250 to $2,500 could cut your premiums by up to 30%.

The higher deductible also makes you less likely to file small claims that could result in a rate hike or even being dropped by your insurer. Boost your emergency fund to make sure you have enough money to cover the deductible.