Insurance can come in handy when you need it. Having a good policy can keep you from falling into medical debt, can protect your finances after a car accident, and can protect your loved ones if something happens to you. When it comes to insurance costs, it’s tempting to get the biggest policy you can, to get the highest payout should something go wrong. But, you don’t always needs a big policy or need to pay high premiums each month. Take a look at your current coverage to see if you can trim your insurance costs a bit and use that money to help you reach other financial goals.
Under the Affordable Care Act, you need to have health insurance or you face a tax fine each year. But, depending on your circumstances, you might not need the best of the best when it comes to a policy. If you’re in good health and only see the doctor for routine or preventative care, you might be fine purchasing a policy with a lower monthly premium and higher deductible. Look at how frequently you went to the doctor’s over the past year and compare it your current premium. When it open enrollment comes around, it might make more sense to change policies.
Another way you might be overspending when it comes to health insurance is if you and your spouse each have separate policies from your respective employers. Consolidating your plans, so that you’re on your partner’s policy or vice versa, can save you a pretty penny each month.
If you’re driving a new car or still making payments on your car loan, you are going to need top-of-the-line insurance, to protect you and your lender should an accident happen. But, if your car is older and has a low value, you might be overspending on its insurance. For example, you might not need collision insurance if your car is worth less than $5,000, as the cost to replace it might be about the same as the cost to repair it and it might not be worth it to pay the extra cost for collision coverage.
Your life insurance needs will change with time. When you’re younger and have dependents, such as a spouse or children, you’ll most likely need a bigger policy than when you are older and aren’t supporting anyone. There are a few calculations you can use to figure out if your life insurance premium is too much. A general rule of thumb, according to Bankrate, is to purchase a policy that pays out seven to 10 times your annual salary. But, that’s not a hard and fast rule, as you also want to look at how many years you’d expect to provide for your family, your current debt and whether you plan on paying for your children’s college.
A bit of insurance can be a good thing, but it’s very easy to go overboard. There are a number of policies out there that few people actually need. For example, if you’re renting a car, your credit card most likely offers some insurance coverage, for free, meaning you can skip the extra fee the rental company wants to charge you.
Always read the fine print carefully on any insurance policy to make sure it’s something that you need and something that will actually provide coverage when you need it. Our goal at CESI Solutions is to help you make smart financial choices. Give us a call today for more guidance when it comes to insurance.
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Consumer Education Services, Inc. (CESI) is a non-profit service provider of comprehensive personal financial education and solutions for all life stages and for all of life’s milestones. Our goal is enhanced economic security for everyone we serve.
CESI is NOT A LOAN COMPANY