1. Review coverage and product options with your independent insurance agent.
One of the advantages of using an independent agent is that s/he represents a number of insurers with different products and can assist customers in fitting the right product at the right price for the unique exposures you present. Keep in mind that a lower price often means inferior service and lesser coverage, possibly lesser to a greater degree than the premium decrease. Also note that this tip deliberately avoids advising you to “shop around” because that implies price comparisons should drive the decision.
2. Consider increasing your deductibles.
While increasing a deductible can save money, it’s important to do it at the right time. Don’t raise the property deductible well past the point of sensible premium reduction on the theory that “it will never happen to me”…insurance purchasing decisions are often made with little regard to post-loss consequences of our current buying decisions. A higher deductible could pay for itself in 3-5 years, but it could take 7-10 years and not be a good investment. The preferred approach is to increase deductibles during good economic times when you can afford a $1,000 – $2,500 loss while accumulating a deductible fund that can be used during hard times if a loss actually occurs then.
3. Look for multiple-policy discounts.
This is common advice and generally good advice. Having homeowners, auto, and excess liability policies in the same company will likely save money and, perhaps even more important, will make it less likely that a coverage gap will show up when more than one insurance company is involved in a claim. Likewise, in business insurance, having general liability and auto coverage in the same insurer using “ISO-standard” or superior forms is often critical.
4. Ask for credits.
Too often, consumers are entitled to credits for alarms, extinguishers, good student driving discounts, etc. but the agent is not aware of them. Ask your agent for a list of everything that could reasonably reduce your premium and see if you can meet those standards. A good example is how your auto is rated for use. If you’re laid off from work or you’ve found a job closer to home, you might very well be entitled to a lower premium. Unless you tell your agent about these kinds of changing circumstances, you won’t reap the benefits of reduced risk.
5. Drop only ”noncritical” coverages.
Examples include towing and rental reimbursement, credit insurance, etc. Your independent agent can assist you in making these decisions. Consider discontinuing high-risk activities such as using ATVs, jet skis, etc. Catastrophic injuries are common with vehicles of these types.
6. Consider dropping physical damage coverage on your vehicles.
As outlined above, this is not always a good idea unless you can absorb a significant 4- or even 5-figure loss. Keep in mind, too, that as an auto loses value, the physical damage premium generally declines as well. Do not be fooled by any simple formula that says you should drop coverage when the value of the vehicle drops below “X” times the premium. You should base your decision on what you can afford to lose and, if your car was destroyed and you could not replace it, how would that affect you financially.
7. Weigh risk management alternatives to insurance.
For example, you could place jewelry in a safety deposit box rather than scheduling it. Needless to say, this is probably more risky, but it’s a reasonable consideration. Also, do not cut back on maintenance and loss control procedures that yield long-term benefits like the reduction of frequent losses and those often excluded by insurance policies.
8. Sell some possessions.
Can you get by without certain autos, motorcycles, ATVs, jet skis and boats, homes, jewelry, guns, etc.? If so, you can drop the insurance on those items. However, it is generally a good idea to not drop insurance on property until your exposure to loss no longer exists. This is especially true of any possession that has a significant liability exposure.
9. Seek expert advice.
Start with your independent insurance agent who is familiar with you and your circumstances, not a consumer web site or publication that presents generalized, sometimes suspect, advice, nor someone who lacks the training and experience to provide sound insurance advice. Work with your agent to seek outside advice from other experts. If you are getting insurance advice from your attorney or accountant, run it by your insurance agent to see what impact it might have on your policy coverages.
10. Question any advice you get, even the advice in this article!
It may not be right for YOU. Before you make decisions to reduce or eliminate insurance coverages, assess your risks of loss. What are your exposures? What can you lose? What exposures represent losses you cannot afford? What exposures can you retain? The quality of your decisions may be the difference between economic survival and bankruptcy. Carefully chose an insurance representative who can help assess risk with a degree of sophistication and business acumen.