Insurance

Financial Challenge – Day 11

February 3, 2006 By Jeffrey Strain 5 Comments

Give yourself a big old pat on the back if your finished the series of making sure you’re getting the best price on your car insurance. If you went through all the steps and still weren’t able to save any money, don’t feel bad at all about it. You should be happier than the rest because that means you had your finances in order long before the challenge was issued. If you were able to bring the cost of your insurance down, don’t forget to take the amount that you saved and place it toward your debt or simple investment plan.

While we will do some more painless saving next week, we’re going to take a short break today and do some financial preparation work. Like getting your free credit reports at staggered times, it may not seem to save any money at this particular moment, but by being prepared it can save you a ton of money, time and headaches in the future. Having your personal finances prepared also will give all the money saving challenges we do a solid foundation from which to work upon. While it won’t take dollars off your current budget immediately, it may well save you a lot of money that you would otherwise have had to spend if you hadn’t been prepared.

In the time you have set aside for today’s Financial Challenge, we are going to do an inventory of all the items in your house. This will accomplish a few important personal financial tasks. First, the inventory will help you determine how much all your “stuff” is worth which you’ll need to know when calculating your net worth (something we will do down the line). In addition, it will ensure that you have to proper amount of insurance for the stuff that you do own. Lastly, in case there is an event where you need to make an insurance claim, you will have the needed evidence to make the claim easy to process and to make sure that you get all the money that you’re entitled to receive. In addition, you will have evidence that will support any losses that can be claimed on your tax return.

The fact is that most people don’t have an inventory of their valuables. When a disaster strikes whether it is local like a fire, or more widespread like a hurricane, the insurance company will want a proof of the items you owned to make a claim. Just becasue you have $50,000 worth of insurance on your household items doesn’t mean that is what the insurance company is going to pay that full amount to you. I fact, it is in their interest to pay the least amount they can to you. It’s ultimately your responsibility to prove that all your items were worth that much money.

While eventually we want to have your list as detailed as possible, something is always better than nothing. Trying to sit down and detail all the items in one sitting would turn the majority of people off (including myself). Besides, I’ve asked that you reserve a half hour for these Financial Challenges, not a complete weekend. Therefore instead of trying to inventory each and every item from the beginning, we will take a backward approach to slowly build the inventory list over time. This will make the entire process much less stressful and much more likely that it will be completed.

To that end, a video camera will come in extremely handy here. If you don’t have a video camera and can’t borrow one from a friend for a day, then a camera can also be used. The first step in this process is to simply take a walk around your house and video tape (or photograph) everything you have in it. Don’t forget to include all the closets, any storage places including the basement and attic, garage and the outside along with all the main rooms in your house. You’ll want to make sure to take valuable items such a jewelry out of their boxes when filming.

To make this challenge a little more fun, before starting the inventory, choose a room or two in the house and make a list of all the stuff you have in it (of course without looking). Then when you begin video taping, you can see how many things you might have forgotten if this was a real claim you were making without and video evidence.

Once you have finished, make a copy of the tape keeping one with you and placing the other one in a bank safety deposit box or at a close relatives house (you don’t want both copies in your house). While this isn’t as good as the detailed list we’ll eventually make, it will be worth hundreds of dollars (if not thousands) compared to your own memory if there ever comes a time when you need to make a claim.

If you’re wondering where to keep the video you made in your house, you might want to consider keeping it as part of a financial emergency kit.

Financial Challenge – Day 10

February 2, 2006 By Jeffrey Strain 6 Comments

We completed the first two out of three parts to making sure that we’re getting the best deal we can on our auto insurance: comparing prices and calculating the price with various deductibles. Today we’ll do the final part to make sure that you’re receiving all the discounts for which you qualify.

Insurance companies base their rates on risk analysis studies. They do extensive studies to find out who is more likely and who is less likely to make an auto insurance claim. If you fall into a group that is less likely to make a claim, this will often result in a discount on your insurance rate while if you fall into the more likely group, the chances are that you’re rates will be increased. While you most likely know of the main discounts which are available to you, the risk analysis often turn up areas which aren’t readily obvious. These are some of the discounts that auto insurance companies may offer:

Coordinated Benefits: If you have medical or work loss insurance benefits from your employer, you can choose to coordinate your medical and work loss insurance with your auto insurance. What this basically means is that your primary insurance in these areas is covered by your work policy and the auto insurance in these areas only kicks in when the work policy benefits run out. Since this makes it much more likely that the auto insurance will not have to pay out for medical costs in the event of an accident, coordinating your benefits can dramatically lower your rate.

Drive safely to get a discount

Drive Safely: Many auto insurance companies offer a discount to policyholders who haven’t made an auto insurance claim in the last 3 to 5 years.

Defensive Driving Course: While many think of a defensive driving course as something that driver’s who are young or with poor driving records must take, they can usually be completed by anyone. If taken within the last three years, they will often times will reduce your auto insurance costs.

Drivers Education Training: If someone in your family is young and just beginning to drive, they may qualify for a discount if they have completed a driver’s education training class.

Anti-Theft Device: If your car has certain anti-theft devices, you may qualify for a discount on the comprehensive and electronic equipment portions of your auto insurance. These anti-theft systems usually have to be “passive” meaning that the device arms itself and requires no intervention on your part such as inputting a code each time.

Auto Recovery Device: Any auto recovery devices (often referred to as a Lo-Jack) which activate when your car is stolen may qualify your for a discount. These make it possible for the police to track the location of the vehicle making it much more likely that it will be recovered. If combined with anti-theft devices, it will often lower the comprehensive portion of you auto insurance.

Wear Your Seat Belt: Many auto insurance companies will reduce the cost of the personal protection portion of your insurance if you sign a form stating that you wear your seat belt in compliance with the law when driving your vehicle. If you sign, however, make sure that you always wear your seat belt. If you have an accident while not wearing your seat belt, this can cause a lot of headaches.

Passive Restraint Systems: Passive restraint systems such as airbags or automatic seat belts can lower the bodily injury portion of your auto insurance. Also auto safety equipment like anti-lock brakes will often provide a discount.

Multiple Vehicle Discount: If you have multiple cars and insure them all with the same auto insurance company, you will likely receive a discount for the additional cars.

Wear your seat belt to get a discount

Multiple Product Discount: Most insurance companies are large entities and provide a wide range of other insurance coverage in addition to auto insurance. If you use the same company to insure more than just your cars (for example fire insurance), you’ll usually qualify for a discount.

Policy Renewal Discounts: If you have been with the same auto insurance company for a number of years and have not had any moving violations or at-fault losses during the previous policy period, you may qualify for a renewal discount.

New Business / Transfer Discount: If you were insured with another auto insurance company and are switching to a new company on your own accord, you may qualify for this discount if your driving record has been clean for the last few years.

Senior Citizen Discount: Auto insurance often gets lower with age because the elderly don’t drive as aggressively as those who are younger. If you are 65 years or older, you may qualify for a discount.

Public Transportation / Carpool: If you travel to and from work by public transportation or by carpool instead of driving your own car, you may be entitled to a discount on your auto insurance.

Low Mileage: If the number of miles you drive your car each year is lower than the average, then you will likely qualify for a discount.

Good Student: If a young person on a policy is still in school, their good grades (usually 3.0 or better) can qualify them for an auto insurance discount.

Military Discount: Some auto insurance companies offer discounts to members of the US military and military reserves.

Occupation Discount: Believe it or not, your occupation can tell whether you’re a a high or low risk for auto insurance companies. For example, studies show that engineers have a lower accident risk than average and may qualify for a discount on their auto insurance. Different companies offer discounts for different occupations, so ask specifically which occupations, if any, qualify for a discount.

Professional Organizations & Clubs: Being a member of certain professional organizations such as AAA can mean a discount on your auto insurance.

Improve Your Credit: Your credit matters when it comes to your auto insurance premiums. Why? Because if your credit is good, you are less likely to commit insurance fraud to try and get money. If your credit has recently improved, you may be entitled to a discount on your auto insurance.

Use public transportation to get a discount

What’s important to remember is that although many insurance companies offer discounts for the above mentioned items (and possibly more), they won’t usually offer you the discount unless you specifically ask for it. Since most people don’t even know many of these exist, they don’t know to ask for the discount even when they may qualify.

In the time you have set aside to do today’s Financial Challenge, you should locate your policy book and take the time to read through it to see all the discounts that your auto insurance policy offers. If the book is several years old, call your insurer and request a new one. If you found a quote that was lower than your current auto insurance policy, call them and request a policy book too (the quote was given for basic information you put in – it could actually be lower if you qualify for other discounts that weren’t taken into account when you input your information).

Once you have all the information, you’re ready to lower your auto insurance rate. This information includes a competing quote, knowing how much you want your deductible to be and what other discounts you may qualify for. If you simply want to switch to a new insurance company that gave you a better quote, contact them to arrange a switch. If you like your current insurer, give them a call and explain:

“I have been offered auto insurance from XX company for $XX and I’m considering their offer. I really like your company and that is why I have been with you up until now. Is it possible that you can match their offer so I can remain with you?”

If they can, then there is nothing else to do and you’ve saved money. If they can’t, be sure to ask:

“What is the best price that you can give to me?”

Auto insurance is like any other business. Competition is tough and keeping good customers is far more economical than trying to find new ones. This means your agent will do his or her best to provide low rates to keep you if you look like you may be ready to move to a competitor.

Once you receive the answer from your auto insurer, thank the agent for their time and say you will need some time to think about it. You now have all the offers and pertinent information so you can make a decision that best fits your budget and needs.

Remember that any savings that you receive should go toward either your debt reduction or your simple investing plan and not spent on something else.

NOTE: The entire challenge series is what I would do with my money and is merely my opinion. You should do thorough research and seek professional advice and decide to do what is best for you. My Disclaimer

Financial Challenge – Day 8 Appendix

February 2, 2006 By Jeffrey Strain 2 Comments

This is a possible update for the Day 8 Financial Challenge where you compared insurance rates. I came across this post over at Retire at 30. Basically he said that while looking for car insurance, he first placed the minimum coverage levels into the quote systems thinking that this was what he currently had ($25,000 for personal, $50,000 for accident and $25,000 for property) for his auto insurance.

Later he found out that his coverage was actually higher than the minimum coverage ($100,000 for personal, $300,000 for accident and $100,000 for property) so he ran the numbers again. When he did, the insurance rates were less for the higher coverage than the minimum coverage. His theory is that people who have higher coverage are a lower risk according to the risk analysis studies and therefore receive a lower rate quote.

As soon as I read this I contacted Nate (who is also looking for less expensive auto insurance) and asked him to run the numbers to see if it was true. Unfortunately, when Nate ran his numbers, the higher coverage was more expensive than the lower coverage, but it was much closer than we had thought it would be (in some cases less than $50 difference).

Since we are all doing this to try and lower our current auto insurance, it would be wonderful if some people can get more insurance coverage for less money, but before I make this a permanent recommendation as part of the Financial Challenge Day 8, I want to get confirmation from someone else that they a quote for higher insurance coverage for less money. Please run the numbers and see – and be sure to let everyone know in the comments whether raising your coverage gets you a better rate or not. This should be an interesting experiment, especially if others can confirm this quirk to be true.

Progressive Auto Insurance or call 1-800-PROGRESSIVE

esurance.com

Insurance.com

Geico Auto Insurance

21st Century Insurance Company

Financial Challenge – Day 9

February 1, 2006 By Jeffrey Strain 7 Comments

In the last challenge we started to look for better rates for auto insurance. This is an exercise that you should get into an habit of doing on a yearly basis to make sure you’re still receiving the best rate that you can get. In addition, you need to reevaluate the different types of coverage that you’re carrying on your car. This is important becasue as your car gets older, it’s worth less and less and therefore the coverage should be adjusted to reflect this.

What is the deductible for these cars?

The next step is to take a good, hard look at your current auto insurance deductible. The deductible is the portion you have to pay out of your own pocket before the insurance company will begin paying. For example, if you have a $500 collision deductible and you accidentally back your car into a pole and put a $200 dent in rear end of your car, you have to pay the entire amount since it is less than your insurance deductible. On the other hand, if you get into an accident which does $1000 worth of damage to your car, you would pay $500 (your deductible) and the auto insurance company would pay the other $500.

While the above example may have you saying that you want a $0 deductible so you don’t have to pay anything if you have an accident, there is one little problem with this. The problem is that the lower your deductible is, the more your insurance payments will be. It’s therefore important to take a close look at what a low deductible will actually cost you. For example, say that your insurance company has told you that increasing your deductible from $250 to $500 would save you $100 a year on your insurance. This would mean that keeping the $250 deductible is the same as paying $100 for $250 ($500 – $250 = $250) in coverage per year. When you look at it from this perspective, a low insurance deductible makes little financial sense.

Your best strategy to save money is to raise your deductible as high as possible with the knowledge that if you do have an accident, you’ll be able to cover the deductible without putting yourself into any type of financial hardship. This is why having an emergency fund is important – not only does it allow you to pay off emergencies without going into credit card debt, it also makes it possible for you to lower other costs such as your car insurance payment. If you’re in a position where raising the deductible will put you in a financial bind, you don’t want to raise the deductible right away, but make a note to raise it as soon as you have built an emergency fund to cover the higher deductible.

Depending how old your car is (for example, most cars over 10 years old), it may even make sense to drop the collision and comprehensive coverage all together. This is especially true if the blue book value of your car is worth less than several thousand dollars. This is because any claim you are likely to make will not substantially exceed the combination of your auto insurance costs and deductible amounts when combined together.

In the time that you have set aside for today’s Financial Challenge, look at your current car insurance deductible and start running the numbers using different deductibles. You can plug different deductible numbers in to the online comparison sites and see how that will change your rates or simply call your current auto insurer and ask how much you would save by raising your insurance deductible.

In the next challenge we’ll finish up the auto insurance portion of the Financial Challenge and let you claim whatever savings that you’ve been able to find, so keep those folders (you did make one, didn’t you?) close at hand.

Financial Challenge – Day 8

January 29, 2006 By Jeffrey Strain 11 Comments

Now that we have set up a plan on where to place the money that we’re going to save, it’s time to begin saving some money. The important thing to remember is that any savings that you reap from the ideas presented needs to go toward your investing plan. If you end up spending it on something else, it defeats the purpose of the entire plan.

There is often an impression that saving money is going to entail a lot of sacrifice and changes in the way you do things. The truth is that there are also a lot of places that you can save money without it changing your lifestyle in the least bit. I refer to these savings as Painless Savings and what we will concentrate on first in these financial challenges.

While the savings that result from these challenges are painless, they do take a bit of effort. I highly encourage you to not just read, but actually follow through on a daily basis. Not every challenge will result in saving money for you, but enough should so that you free up the $100+ we want per month at a minimum for our simple investing plan. Above all, please don’t assume before even trying that it won’t work. Commit to trying and see the results and you will be much better off come 2007.

Now that you are committed to giving it a try, let’s move on to actually doing it. Since I’m in Japan, I actually had Nate help me out with this challenge a few days ago and he ended finding $200 in savings compared to his current insurance policy.

If you are like the majority of people, you’re likely using the same auto insurance company as the one you had when you first signed up for an auto insurance policy. If you haven’t compared your auto insurance rates within the last year, that is exactly what we’re going to do today. Even if you are perfectly satisfied with your current insurer, it’s likely you can reduce what you’re paying even without changing insurance companies simply by finding a better rate from a competitor.

The first step to saving is to find your current auto insurance policy. This is important as it’s necessary to know what your current insurance rates are and the types of coverage your auto policy currently covers. If you have no idea where your insurance policy is, call your agent and have a copy sent to you.

Once you have your current policy in hand, you have the information you need to do a quick Internet comparison search. There are a huge number of comparison sites and below is just a small sampling of those out there.

You will want to do the comparison with more than one site. Even though the comparison sites will give you a number of results, there are a couple of reasons you want to do several searches. First, different comparison sites may have different auto insurance companies in their data base meaning if you only do one search, you may be missing a lower rate elsewhere. Secondly, they may use different characteristics when giving the quote such as searching your traffic records for the past 3 years rather than 5 years.

Here are a few sites where you can begin your search (note: some – not all – of these will pay us a small fee if you use them, but all are leading comparison sites that we picked before knowing whether or not they had an affiliate program)

Progressive Auto Insurance or call 1-800-PROGRESSIVE

esurance.com

Insurance.com

And a couple of discount auto insurance companies that are often left out of the comparison sites:

Geico Auto Insurance

21st Century Insurance Company

If you want more comparison sites, a simple search for auto insurance comparison will give you more.

Input the exact same coverage that you are currently carrying with your policy and see if any of the results give you a better rate than you’re currently receiving. If you get results that beat your current auto insurance rate, you have put yourself in the driver’s seat, so to speak. Even if they don’t, there are still some other other opportunities to reduce your current rates.

In the time you have set aside for today we want to do the following:

1. Find your auto insurance policy.
2. Input the same numbers on your policy into the comparison sites and see what quotes you get.
3. Create an auto insurance folder (yes, we’re also going to try and get you a bit more organized in these challenges) if you don’t have one

If you find a rate that is better than your current rate, print it our and save it in your folder. If you didn’t find any rates better than your current rate, don’t despair. This is actually good news because it means you haven’t been overpaying up until this point. Secondly, we’ll look at other possible ways to save you some money on your auto insurance tomorrow so there may still be an opportunity to reduce your current costs. For this reason, even if you were quoted a better rate, don’t change your insurance until we hit a couple of other money saving topics with your auto insurance in the next couple of days.

Time To Refinance – But Not Your Home

January 6, 2006 By Jeffrey Strain 5 Comments

If you were smart, you have already refinanced your home loan to a lower rate (and if you haven’t, then it’s time to get on the ball and do so), but with interest rates now rising, it’s not likely that refinancing is going to bring the savings that it has in the past. That is, unless you begin to refinancing other aspects of your personal finances.

Rates on a number of different types of insurance policies have been falling with stiffer competition and more people willing to shop around. For example, experts say that term life insurance rates have been falling and are expected to continue to do so through 2006. A similar trend has been seen with car insurance in certain parts of the country.

Most people don’t think about it, but you can refinance your insurance just like you refinance your house mortgage. Depending what your goals are, you can either pay less for the same coverage or pay the same amount of money for better coverage.

How do you go about refinancing your insurance? The same fashion as you would go about refinancing your house, but it usually takes a lot less time and paperwork. Keep an eye on advertisements in your paper. Take an hour to search comparison sites on the Internet and see what prices are being offered that mirror your current policy. If you find a policy that is charging less, you can choose to refinance at a better price or if you like your current insurance company, you can probably negotiate with them to match the competing offer (or at least reduce your current payments). This is because competition is tough and keeping good customers is far more economical than trying to find new ones. Your current agent will do his or her best to provide low rates to keep you if you look like you may be ready to move to another competitor.

You should look into refinancing on a yearly basis on all your different insurance policies (life, car, home, etc). It only takes a few hours of work and can pay off handsomely. Even better, refinancing your insurance is a painless savings in that you don’t have to give anything up to put more money in your pocket.