Let’s Talk About It: The Truth About Auto & Home Insurance

I know. It’s not everyone’s favorite topic, but… bear with me.

Auto and Home Insurance can be a great way to discover more money in your financial plan, especially if your spending plan or budget is very tight. Insurance prices do tend to change and fluctuate very frequently. Because of this, it’s wise to shop around for better deals at least once a year.

It’s definitely common, but most people often forget to revisit their payment structures and wind up paying significantly more on premiums than what they should. I won’t keep you long, but let’s dig in to some basics.

Auto Insurance

We can’t deny that many factors affect our auto policy rates––young drivers, older drivers, accidents, parking and speeding tickets, the random animal collision (mainly deer and bear in my area). The list goes on.

According to ValuePenguin, “the formulas insurers use to set insurance premiums change frequently, so the company that gave you the lowest price two years ago might not be the best option now. And, if any life circumstances that impact your car insurance rates have changed—i.e. you bought a new car, added a new person on your policy, or you moved—

"there’s an even bigger possibility you’ll be able to find a better rate."

Real life example? I have young male drivers on my policy and I saved $200 a month last year. Sometimes, it becomes a game for me: what will I save this year?

Home Insurance

Then, there’s your home policy. With rates rising rapidly across the country over the past 10 years, more people are being cognizant of the prices that are initially presented to them.

Here’s something that I learned recently: for every year that you have your homeowners insurance in place, your rate increases to keep pace with current home values. In other words, you may have insurance, but the company doesn’t want you to be underinsured.

I’m not sure how long we had our last policy, but, at one point, the agent asked: “Is your home worth $900K?” Our answer: well, no, it’s not. They then wanted to know why we were insuring it to the level that we were. In short, we weren’t really sure.

If you don’t keep a watchful eye on the insured amount, it could continue to climb and end up being well above your home’s value. Even with my home being insured to $900K, if something catastrophic were to happen, they would only be willing to pay the actual cost of the house if something happened.

In my opinion, this is wasted money. I had the agent adjust our home value and saved $700 on my homeowners last year. I consider that a win.

Expert Tips

Every year, I like to check and see if I can get a better rate. My auto renewal usually comes up in July, so I have a reminder set up in my calendar for June.

If you can, sometimes it can help to bundle home and auto for an additional discount.

It can be difficult and time consuming to visit a bunch of websites or call around to different companies. You can save time by going to an agency that represents multiple insurers so you can make one call and find the best price. Agencies work with many different insurers and should be able to get a good price regardless of the agency.

If you are able to, pay the premium in full. That will likely give you another discount. Pay with money or cash on hand, not credit. And, if you pay in full, pay yourself monthly so you are ready for the next payment when it comes around.

If your homeowner’s policy is paid through your mortgage, keep in mind that the mortgage company may renew it very early, so plan to be ahead of their escrow draft if you want to pay it yourself.

"You may think it’s a pain to switch policies, but your wallet will thank you later."

That new found money could go back into your spending plan where it’s needed most (i.e. groceries, emergency funds or retirement assets).

If you have questions, I’d love to help you!