Cut all your coverage costs

Eight smart ways to trim your auto, home, and life insurance premiums

Premiums for your car, home, and life insurance probably make up a nice chunk of your fixed expenses. While you should never consider axing essential policies to save money, you can pay less in premiums while maintaining your coverage. Here’s how:

Raise the deductible

By agreeing to pay more up front before an auto or home insurer starts paying a loss claim—$1,000 or $2,000, say, instead of $250—you’ll pay lower premiums. Of course, that means you’ll pay more out of pocket in the event of a loss, but accidents are not a certainty while premiums are.

A higher deductible also means that you shouldn’t file a claim for small losses unless someone is injured, property damage will be greater than your deductible, or the other guy is at fault (in which case you generally don’t have to pay a deductible).

Shop for a new insurer

Insurance is a competitive business, and another company might give you the same coverage you have now for as much as 25 to 30 percent less, says Don Griffin, vice president of personal lines for the Property Casualty Insurers Association of America.

Find out if your state insurance department publishes rate comparisons on its Web site or in print. Or get free quotes from online brokers, such as Accuquote.com, FindMyInsurance.com, Insure.com, Insweb.com, LifeInsure.com, and LifeQuote.com.

Use untapped discounts

Property and casualty insurers typically offer a variety of discounts, including some for married people; members of professional, academic, or other groups; students who get good grades; and customers who buy multiple policies. Ask your agent which discounts you might qualify for.

Pay your bills on time

Auto and home insurers in most states factor your credit score into their rate formulas because of a correlation between credit history and claims. Avoid an insurance rate hike by maintaining a good credit rating. Periodically check your credit reports for errors that could hurt your score.

Drop collision coverage

If you have an older car worth less than 10 times your annual collision and comprehensive premiums, your payments are more than you’d probably recover in a claim after your deductible. In that case, your vehicle will be declared a total loss if the cost to repair it surpasses its declining book value. So while the car might be repairable, you won’t collect enough to cover the cost.

Delay your child’s driver’s license

This one may cost you a Parent of the Year award, but you can postpone a large premium increase for a year or two until the economy and perhaps your finances improve. Your auto insurance rates can rise 100 percent or more when your child reaches the age to qualify for a license, as low as 14 in some states. If that time has arrived for you, consider having your teenager wait until age 18 or 19 to get a license, don’t let him drive until then (of course), and inform your insurer of those facts.

Cut your death benefit

If you no longer need as much life insurance and your insurer allows it, this can be a big money saver. A 54-year-old with a $500,000 term life policy, for example, could cut his annual premium from $1,875 to $963 by reducing the death benefit to $250,000, says Byron Udell, CEO of Accuquote.com. While this is better than letting your policy lapse completely, Udell cautions against cutting your benefit in today’s economy. “Most people are underinsured to begin with, and now that their assets have declined in value, they’re even further uninsured,” he says. And don’t scale back coverage for your home or car (see box below).

Convert to a paid-up life policy

You can completely eliminate your premiums on a cash-value life insurance policy (a type we generally don’t recommend) by converting it to a paid-up policy. You retain the cash value, but the trade-off is a reduced death benefit. This is often preferable to cashing out the policy, which takes away your death benefit altogether and could result in getting back less than the full cash value.

This article appeared in the July 2009 issue of Consumer Reports Money Adviser.