Tightening the Belt

The economy has been on the minds of many people in this country. In January, we begin a new year, along with a new administration, and many individuals and businesses are looking for ways to save money.

Insurance is normally one of the most important purchases made during the year, but many do not spend enough time reviewing what they are buying and at what cost. The following are some ideas to help reduce the premium costs for your insurance portfolio. I present these ideas with the premise that insurance companies do not believe you are purchasing a “maintenance policy.”

While many consumers view their insurance policies as warranties to handle the little dings, dents and breakdowns, I can assure you that the insurance industry does not see your policy the same way. Most companies operate with an underwriting philosophy that “frequency breeds severity,” which makes your decision in reporting claims very important in your overall insurance portfolio. Now to the savings:

Deductibles. Since underwriters do not want small claims, you might as well save the money on premiums. Currently, the standard homeowner’s deductible is $500 and most commercial property coverage forms have a similar deductible. If you have a large property line that creates higher premiums, you might even want to consider a $1,000 or $2,500 deductible. Your insurance professional can easily calculate the cost savings, which could allow you to recoup your savings within a few years if you go loss-free.

The same is true of automobile deductibles. I recommend that you carry $250 comprehensive and $500 collision. Most consumers’ biggest concern with regard to auto insurance is a glass claim, and some companies even offer a zero-glass deductible as an inexpensive buyback. The glass companies in central Illinois are very responsive and affordable if you choose to pay for the glass yourself. Again, the philosophy here is to reduce future price increases by paying the claims. If you have a whole fleet of vehicles that are on the road often, I would recommend establishing a fleet contract with a glass company to help control costs.

Improve your credit. Your overall financial responsibility and ability to pay bills on time have become major factors in how your insurance premiums are calculated. Companies are not allowed to discriminate based solely on insurance scoring, but it is extremely important. Many factors are used to calculate this score, and each company weighs the factors differently. I would recommend you order a personal credit report and make sure your information is accurate. If you operate a business, it would be wise to order a Dun & Bradstreet report. Many underwriters use the D&B to help their decision-making process. Many lines of credit can remain open after you have met your financial obligation, but they are still held against you as available credit.

Several years ago, a law was passed giving all citizens the right to order their credit reports from the three major credit bureaus once a year—at no cost—from the website annualcreditreport.com. One way to stay on top of your credit is to set up an ordering schedule. If you order from a different company each quarter, it may help to eliminate any credit problems or scams that may be occurring with your credit. iBi

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