Kat's Money Corner: Save big on insurance...really

KatI’m sticking with the insurance theme again this week, for good reason – there’s a lot of ground to cover, and a lot of dollars to save.

Did you know the average American spends more than $2,000 each year on auto, life and homeowners’ insurance? And what do you get for that money? Most people probably don’t know, and that’s definitely not a good thing.

Let’s start with coverage limits. If your maximum liability coverage is too low, on either your auto or homeowner’s policy, a lawsuit could wipe you out. Suppose you have a $25,000 maximum on your automotive property damage policy, and you have a collision with a brand new Jaguar or Escalade that’s judged to be your fault. All damages above that $25,000 limit are going to have to come out of your pocket. Yikes!

The bodily injury maximum is a separate category on your policy, which covers medical bills for people injured in accidents. Most states have legal minimums for such coverage, but those are often much lower than the tab for a serious hospitalization.

Higher maximums mean higher premiums, but you can compensate at the other end of the spectrum by raising your deductible. Ask for rate quotes on a deductible that’s $500 or even $1,000 higher; compare it to your current rate and see how long it would take you to break even. If you choose to put that $500 or $1,000 in an interest-bearing savings account, you’d likely come out way ahead. This, of course, is an individual choice based on your risk tolerance. Here’s a good overview of multiple ways to lower your car insurance costs, and this link has great tips for lowering homeowner’s policy costs.

Finally, life insurance may sound incredibly complicated, but that’s only if you treat it as some kind of exotic investment vehicle instead of insurance to protect your family against the loss of your income. You just need to calculate how much coverage you need, and then shop around for the best price. Good information on smart shopping for life insurance can be found here.

Look for Kat's post every Tuesday on Dollars & Sense. When not blogging, Kat is a manager with CommunityAmerica Credit Union.