Archives For Insurance

Remember last summer wehn I wrote about how my insurance agent set me up with a new auto insurance policy and that by doing so, I was going to save $800 per year? If not, you can read about it here. The only difference that I could tell between the new policy and my old policy was that the new one was a 6-month policy while the old policy was for one year.

I got my renewal in the mail this week. It looks like I’m going to have to give back some of that savings.

The renewal premium is $731, which is $84 more than my policy from 6 months ago. It doesn’t seem like that much of an increase but if they do this to me every six months, I ain’t gonna be happy! If I annualize the new premium, it makes premium $1,462 per year, which is still a lot cheaper than the old policy.

I asked the agent about this and she said that Travelers raised their rates and that my renewal reflected that. Now I know why the insurance company went with a 6-month policy! Every six months they have an opportunity to raise rates.

Our homeowner’s insurance is up for renewal next month. I hadn’t received any notices or anything yet so I decided to call to see what our renewal rate was going to be. I had to leave a message and an hour or so later an agent called me back. She told me that she had been working on our policy this week and that she was working with the insurance company in trying to get some adjustments made. Apparantly our insurance company (Travelers) has changed its windstorm coverage, by raising the deductible to 2% instead of the customary 1%. For us that’s like a $4,000 deductible, which seems pretty high.

Anyway, our insurance agent told me that she was working on it and would have our premium details soon. Then she told me that she looked at our auto insurance and noticed that we were in a grandfathered plan. She told me that Travelers has a new program and that based on our records and credit rating she could get us more coverage at LESS COST per year. A LOT less! We are currently paying around $2,000 per year and the new rate would be somewhere in the neighborhood of $1,200 per year! A savings of $800 per year ($67 per month). That’s some significant savings!

I would have never known about any of this had it not been for our agent. Needless to say, I’m quite pleased.

Full Disclosure: The insurance agency of which I speak is partly owned by my father-in-law.

Lenders require car owners to carry collision and comprehensive insurance coverage on their vehicles as long as there is a lien against them (meaning, while they are being paid off). Then, once the vehicle is paid for, it is usually up to the insured to choose whether or not to carry the extra insurance. I’m blogging about this because our Buick will be paid off in June, which means there will no longer be a lien against it and we will be free to drop our comprehensive coverage and collision insurance.

Since our Buick is still worth $10,000 – $12,000 and the premium for collision and comprehensive coverage is only $425 per year (with a $1,000 deductible) it’s a no-brainer to keep the coverage. I will probably keep the coverage until the value of the car is around $3,000. Why $3,000? It just seems like a good number to me. It’s low enough that we could cover it out of our savings. In other words, if something happened to our car when it was worth $3,000, it wouldn’t put us in financial strain to pay for it out of savings.

I dropped both comprehensive and collision on our Honda Civic last year, which reduced our premium by nearly $500. It’s nice to have an emergency fund!

By now most of us know the importance of having an emergency fund. Having enough money set aside to cover 3 – 6 month’s worth of living expenses makes a lot of sense and can help put a person or family back on their feet should they experience something like a job loss or a naturual disaster. That said, it also makes sense to USE that emergency fund, which can help your monthly cashflow and help you build wealth by saving you thousands of dollars each year. How do we do this? Here’s two easy ways to use your emergency fund:

1. Stick it in a money market or high-interest savings account. On a $10,000 emergency fund at 5% interest, you could earn an additional $500 or more per year. (You would actually earn more than that due to compounding, but I wanted to keep the math simple.)

2. Raise the deductibles on your car and homeowner’s insurance. Earlier this year, I talked about how I adjusted my auto insurance and reduced by annual premium by nearly $500 per year. I bumped up our deductible to $1,000 from $500 and dropped comprehensive coverage on our old Honda Civic. You can also raise the deductible on your homeowner’s insurance. Check out the table below, which I put together with my homeowner’s insurance information:

Our deductible is based on the coverage for our dwelling, which is currently set at $180,000.


Amount ($)














*Annual savings calculated based on the original premium of $1,528.

So, based on this information, if I had a large enough emergency fund, I could raise my deductible to 5%, and save myself $701 per year on my homeowner’s insurance premium.

In addition to the savings on the premiums, there’s also the hidden benefit of having a higher deductible in that you will be less likely need to file a claim. We all know that filing claims raises premiums.

So, adding it all up, we see that an emergency fund can potentially save a person nearly $1,700 per year ($500 earnings on e-fund + $498 saved on auto insurance + $701 saved on homeowner’s insurance = $1,699). That $1,700 invested in a Roth IRA at a 10% rate of return could potentially be worth nearly $100,000 in 20 years!

What are the disadvantages to doing this?

None as long as you have an emergency fund that is large enough to cover the deductibles. At the VERY LEAST, the emergency fund should equal all the deductibles. Ideally though, an emergency fund consisting of 3 – 6 months of living expenses is the way to go.

It’s true: the rich really do get richer!

Life, Not Death Insurance

September 14, 2006

Here’s why life insurance is so important. She doesn’t state how old her husband was when he died, but she is only 32! You just never know what life is going to throw at you. Anyway, stop by her blog and offer her some encouragement. As her blog’s title says, Life Goes on…

UPDATE I followed-up this post with a response to Emily question (from the comments section).

We are all familiar with stories about shady salesmen selling people fee-ridden insurance products without fully disclosing the fees and penalties for getting out of the product if you decide it is not for you. As if these salesmen weren’t enough to worry about, there’s something else you need to be aware of: Continue Reading…

I put this Life Insurance Needs Calculator together this weekend as a BEGINNING POINT for those who are evaluating their life insurance. The purpose of the calculator Continue Reading…