Tips To Save On Insurance

In the last couple of years, it has become more expensive to insure homes and cars - leaving many people searching for ways to trim their monthly payments.

Help is here! The Saturday Early Show's financial adviser Ray Martin has some tips to help you find hidden savings on your insurance bills.

Martin says individuals aren't the only ones who have lost money in the recent bad economy. In 2001, the insurance industry registered its first-ever loss. He says many people may not realize that the insurance industry makes a lot of its money from investment income. Take away that income, and the industry has to raise prices to turn a profit.

In essence, homeowners were getting a break from rate increases in the past because insurers were reaping huge profits from investments in the stock market over that same period.

Martin says increases in homeowners insurance also may be linked to more floods, hailstorms and claims for mold damage in recent years. Mold claims cost insurers five times more in 2001 than in 2000.

And there's more bad news for homeowners. Not only are rates going up, but many policies are being terminated altogether. Insurers, such as State Farm, will no longer write new policies in several states, including Texas, California and Louisiana.

Lowering Homeowners Insurance Costs

It's possible to save a lot of money on both homeowners and auto insurance, Martin says. However, there's not one single move that's going to result in big savings. The key is making several small changes that add up to large savings, such as:

• Raise Your Deductible: Martin says this is a big one. Most people hesitate to raise their deductibles to $1,000 or more. But, he says, if damage costing $1,000 occurs, it shouldn't bankrupt you. You should be in the position to handle this cost.
  
  
• Ask for Discounts: Martin says to tell your insurance company if you have a sprinkler system or alarm system, if your home is near a fire hydrant, or if you've updated major systems in an older home. All of these items might earn you a discount.
  
  
• Pay Premiums Annually: This usually is cheaper than paying monthly or quarterly because you eliminate a billing fee, Martin says.
  
  
• Coordinate Liability Coverage: Every homeowners policy comes with some liability coverage. However, if something happened and you really needed the coverage, there's no way you would have enough. Martin recommends that you buy a separate "excess liability policy" that is more than your net worth. Once you've done this, lower the amount of liability coverage in your homeowner's policy. For example, if your excess liability policy agrees to cover anything over $300,000, the liability in your homeowners' policy should only equal $300,000.
  
  
• Look for Mutual Insurance Company: If your property insurance company is owned by the policy holders, you have the option of receiving dividends from this company. Martin says you will pay a little bit more for your coverage, but if the company is profitable that year, you will get money back from them. Before choosing this dividend paying option with a company, ask to see the company's dividend history, he advises.
  
  
• Limit Your Claims: The April issue of Money magazine reports: "Frequent claims, even as few as two in five years, will likely mark you as a bad risk." Martin says insurers do consider the claims' severity. So, a freak hailstorm that damaged your roof probably won't be held against you. But two claims for break-ins may signal that you're not properly protecting your property. Money magazine reports the biggest red flags are water claims, which accounted for 32 percent of all insurance claims in 2001, up from 24 percent in 1997.
  
  Also, Martin explains, homeowners may not realize that simply calling to inquire about a claim - not even officially filing a claim - can also hurt them. A mere inquiry can result in creation of a home-damage file.
  
  
• Get a CLUE: If you're getting ready to buy a house, Martin suggest to ask to see its CLUE report which shows every insurance claim made on the house in the past five years. The report is from the Comprehensive Loss Underwriting Exchange, a privately run national electronic database for the insurance industry. If there are several claims on the report you can anticipate having trouble obtaining your own policy on the property. You can get a copy of the report for $12.95 at www.choicetrust.com.

Lowering Auto Insurance Costs

After seeing increases last year, car owners can expect another increase in insurance costs this year of at least nine percent, says Martin. The Insurance Information Institute say higher medical, vehicular-repair costs and liability costs are behind the increase.

Insurers are increasingly turning to credit scores to determine prices, a big change in the auto insurance industry. While this is not prompting an national increase, says Martin, it's certainly jacking up costs for individuals.

Consumers complain that there's no logical connection between paying bills on time (a large piece of your credit score) and the likelihood of having an accident. Some states have recently passed laws banning or restricting the use of credit scores by auto insurers. Martin says this practice is expected to become an increasingly controversial issue.

When it comes down to it, the biggest determinants of your policy price are age, driving record and which state you call home. But, Martin says, anyone can use the following tips to lower their insurance costs.

• Shop Around: This is especially true when it comes to auto insurance. Experts say you can save as much as $1,000 a year by comparing rates.
  
  
• Raise Your Deductible: Martin says this will lower your costs. Raising your deductible from $500 to $1,000 can save you up to 40 percent.
  
  
• Reduce or Drop Some Coverage: Martin says you probably don't need a lot of collision insurance - if any - on an older vehicle. Even if you're in an accident, the car's probably not worth much anyway, he says. He suggests to consult Kelly Blue Book or a similar source to determine your car's worth and adjust your coverage accordingly.
  
  If you are a member of AAA, you don't need insurance for towing on your policy. If you have health insurance at work, you don't need health coverage for yourself or your family on your auto policy. Martin says the thing to remember here is that car insurance is actually a bundle of smaller policies. Examine each part closely to insure that you actually need it.
  
  
• Ask for Discounts: Martin says you can catch a break for things such as driving only a few miles a day, having an anti-theft system and even belonging to certain groups, such as AARP or a college alumni association.
  
  
• Consider Bundling: Using the same company to insure your home and automobile often saves you money, according to Martin.
  
  
• Shop Smart for Cars: Martin says if you're in the market for a new car, remember that some cars cost more to insure than others because they are in more accidents or are more likely to be stolen. Insure.com surveyed the top three auto insurers to find the following results:
  
  The Most Expensive Cars to Insure
  Mitsubishi Montero Sport
  Chevrolet Corvette Convertible
  Lexus GS 430
  Cadillac Escalade
  BMW 7 Series
  Honda Civic Coupe
  
  The Least Expensive Cars to Insure:
  Buick LeSabre
  Oldsmobile Silhouette
  Honda Odyssey
  Buick Park Avenue
  Pontiac Montana