As annual household incomes continue to decline, more and more people are looking for ways to curtail expenses as we ride out this recession. Whether it’s through coupon cutting, cooking meals at home instead of dining out, renting movies instead of heading out to the theater, or vacationing locally, more and more of us are taking steps to ride out the economic storm. Unfortunately, one of the most overlooked aspects of a person’s financial makeup is what they are paying for their insurance. Whether its homeowners insurance being paid for via escrow payments, auto insurance premium payments being paid via direct debit from a checking account, or simply being too busy to care, many people overlook the expense for this service which everyone needs, and/or that is required of us in our daily lives.
For most, auto and a form of homeowners insurance is what people are responsible for. However for business and commercial property owners, we need to worry about additional forms of coverage like commercial liability, building insurance, and group health benefits. No matter what our situations may be, there will always be one common denominator that we share: We will all need or have insurance at some point. The question is: Are we maximizing our premium dollars for the coverage we require?
Assessing Your Premium Outlay
The first step in determining how much you are paying for your coverage’s is to gather up all your policy documents. If possible, gather up three years worth of renewal documentation to track what you spend each year in premium. In many cases, you will be very disappointed to learn that your annual costs for insurance have increased over the years. Indeed, it’s very easy to lose sight over how much you are paying in insurance premium. However once realized, you can then plan an attack in attempting to reduce costs without sacrificing coverage.
Knowing Your Carrier Options
Now that you’ve realized your insurance costs have increased over the years, you are probably asking yourself, “So what can I do about it?” Good question!
First, always remember that there’s always another insurance company out there competing for your business. For some types of policies, there are literally hundreds of other companies to choose from (e.g. auto insurance). So which one do you choose? Well, there are two ways to get quotes with other companies for identical coverage:
-Call a few carriers directly (small sample of alternative options)
-Work with an independent broker (large sample of alternative options)
With these two methods of shopping come two distinct differences. When working with a company directly, remember, the agent on the other end of the line represents the insurance company…not the insured (you). Thus, an insurance agent has their company’s best interest in mind since they can only offer you one type of policy you are interested in at their fixed price. On the other hand, when you work with an independent broker, the broker represents you…the insured. This means that your broker can work with a very large pool of insurance companies to find a policy that works best for you, and at a price you can afford.
Finding the Right Balance
When attempting to reduce costs for insurance, remember, you need to do this carefully as to not sacrifice coverage. After all, what good is an insurance policy if you will not be properly indemnified in the event of a loss? Thus, with any quote that you receive directly from an insurance company, make certain that your coverage’s, limits of liability, and forms & endorsements are identical to your current policy.
If you find this to be a difficult or confusing task, seek out a trusted insurance broker to assist you. They will lay out all of the quote line items for you in detail so that you are fully educated in your policy decision. Remember: an insurance broker works for you…not an insurance company.
Understanding the Switch
When considering a switch of insurance companies, it’s important to know what’s involved. Depending on the policy type, circumstances vary from no impact to, to cancellation penalties, and policy period restrictions:
-Personal Insurance (e.g. auto insurance, homeowners insurance, renters): You can change companies at any time during the policy year with no cancellation fees. Additionally, any unused portion of premiums paid to the prior company will be refunded to you
–Commercial Insurance (e.g. business liability, commercial liability packages): You can change companies at any time during the policy year, but you will be subject to a short rate penalty (usually 10% of the annual premium). Thus, the ideal time to shop your commercial insurance policy is three months before your next policy renewal
–Group Health Insurance: For employer groups with 2-50 covered lives, you can change companies at any time without penalty. Bear in mind that most health insurance enrollment dates begin on the 1st of every month, so you will want to time your switch appropriately. For employer groups with over 50 lives, due to extensive underwriting times and annually compiled group data, the ideal time to shop your company benefits is two months before your next policy renewal
Understanding Policy Availability
Equally important to knowing the carriers that are available to you, are the actual products that are available to you or your business. For example with auto insurance, drivers over the age of 50 should be taking advantage of AARP auto insurance rates. With group health insurance, business owners and benefits administrators should be taking advantage of HSA and HRA-qualified plans which greatly reduces premium costs. Your trusted insurance broker will always present you with every possible policy option available to you or your business.
Managing expenses during a bad recession can certainly be frustrating. However with knowledge, good planning, and appointing the proper professionals, you can successfully survive these challenging economic times.