Car insurance costs are rising, forcing drivers to search for ways to save money in already tight budgets. According to a Bankrate report, the average annual premium of full coverage auto insurance rose 26% from last year to $2,543 in 2024.
Insurance is simply a way to manage your financial risks. When you purchase a policy, you are essentially buying protection against potential financial losses.
The insurance company pays you or someone you choose if something bad happens. And if you have no insurance when an accident happens, you may be responsible for all related costs. This annual insurance “audit” habit, broken down into five easy steps, can save you thousands of dollars each spring.
1. ‘A’ Is For Assemble Your Documentation
Assemble your insurance policies and documents every year. Schedule around four hours to gather all your insurance papers, from the booklets to the receipts, in a safe spot.
Normally, I’m all about digital, but reviewing policies in paper form makes it easier for me to read, highlight and underline. I keep them in a safe along with other important documents. So, when you have a stressful situation that requires filing a claim, you don’t have to rummage around or remember your username and password to find out what your insurance covers.
2. ‘U’ Is For Understand Your Coverage
To understand your insurance coverage and costs, you don’t need to become an expert. However, it’s important to actually read the fine print and review all of the coverage limits. And you must review the actual costs and the parameters you are paying for — specifically the premiums, the deductibles and the overall policy costs.
As a financial coach, one of the biggest pains my students experience is they assume their insurance covered the costs of an accident — only to find out there was a very high deductible or that it wasn’t covered at all by the policy.
The deductible is the amount that you will need to pay for covered services before your insurance plan starts to do its job. For example, if you have a $2,000 deductible, you must pay the first $2,000 of covered services yourself. You have to pay that deductible in full before your insurance kicks in money for the remaining expenses.
3. ‘D’ Is For Determine Discounts
This step is where the annual “audit” is most valuable. Once a year, seek out at least two other providers for each type of insurance and compare potential discounts and bundling opportunities.
Also, check if any of your affiliations or organizations offer a member discount, such as your employer, church or societies. For example, I once earned a 25% discount on my home and auto insurance because I was a member of my college honor society.
During our annual audit, my husband requests quotes for insurance coverage levels directly below and above our desired level. For example, if we estimate we need loss coverage of $500,000, then we ask for the prices of $300,000 and $750,000 coverage within the same provider. He found going to the higher coverage was less than $10 more per six months. So, it was worth the upgrade. These kinds of cost-benefit analyses will help you make an informed decision.
4. ‘I’ Is For Investigate Customer Service
Find your current insurance providers on the Better Business Bureau or other similar customer review sites and research how they have been rated in the past year. Evaluate how they respond to customer claims and other users’ satisfaction with claims processing and overall customer service.
However, it is important to actually test out companies’ customer service for yourself. During your annual audit, call the customer care centers at each of your insurance providers and ask about your policy. Take a few minutes to test if their response times are acceptable. Speaking directly to your insurance agent can help you make an informed decision about the company’s service levels.
5. ‘T’ Stands For Tailor To Your Needs
Reassess your insurance needs based on life changes and major events you experienced in the past year. Consider if you’ve had any major repairs or damages or renovations to your home that might affect your coverage.
If you know a major change is coming up that could impact your budget, plan ahead during your audit. For example, one of my financial education students was considering moving from North Carolina to California. To determine what his budget would be while paying down student loans, he took the extra time to call insurance agents in California. He compared what their rates would be for his renter’s insurance and auto insurance. He also planned accordingly when he moved, since his payments would be much higher in his new state.
As you find any of these changing needs on an annual basis, spring is a perfect time to consult with your insurance agents. Discuss adjustments and make updates that fit the amount of coverage you need and make sure you’re maximizing benefits for the premiums you are paying for. This audit can save you tens and even hundreds of thousands of dollars over your lifetime.
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