For the last few weeks, we’ve made a point of saying not to shop price when purchasing property & casualty insurance. However, we want to be sure to note that there are ways to save money on your insurance, even after you structure a policy to protect yourself well.

Discounts

Most insurance companies have a long list of discounts that can have a big impact on the price of your insurance premiums. A big one is the multiline discount. It is always simpler to have all of your property & casualty insurance through the same insurance company. You just have to make sure you find a company that can provide the right type of coverage. Then you should be able to use their multiline discount, which will lower the premium on all the property & casualty policies you have with them.

There are many other possible discounts as well: safe driver and good student discounts for auto, home alarm system discount for homeowners, etc. Be sure to check with your agent to make sure you are taking advantage of all the discounts you qualify for.

Deductibles

Another area that may be able to save you money in premiums is adjusting your deductibles. For example, if you have a $250 deductible on your Collision coverage, it may be worth adjusting it up to $500 or $1,000 (if you can afford the payout in the event of an accident). The way to decide if the savings is worth it, take the difference in deductibles and divide it by the difference in the annual premiums. This will give you your payback period (how long it would take in saved premium to make up the difference in deductible). If this period is five years or less for auto, and eight years or less for homeowners, then the increase in deductible is probably worth it.

The reasoning behind using five years for auto and eight years for homeowners is simple. Property and casualty insurance companies expect that you’ll file an auto claim about once every fives years, and that you’ll file a homeowners claim once every eight. So, if your payback period falls within these years, you’ll have saved enough money in premiums to pay for the difference in deductible at claim time.

So, for an example, the difference in a $250 and $500 deductible is $250. The difference in the annual premium with those two deductibles is $70.

$250 / $70 = 3.57

So, increasing the deductible to $500 would save you $70 in annual premiums, giving you a payback period of 3.57 years. So, as long as you can afford the extra out of pocket cost of the increased deductible, then the increase would be worth it. You use this method for both auto and homeowners insurance to decide on the right deductible for you.

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