According to AAA, car insurance will cost the average American motorist $1,029 a year in 2013, up $28 a year from 2012. Homeowners insurance runs the average household around $1,000 a year (costs vary based on value and size of house, location, etc.), but many insurers have submitted requests to state departments of insurance for rates hikes of 5 to 10 percent or more .
So finding a few ways to slash even a few bucks off your insurance bill can be beneficial for your budget. But we don’t think a few bucks is enough.
Using a family of four as a sample family, here’s a look at how to save hundreds, or even thousands on your insurance.
1. Pay as you drive.
Before automatically renewing your current car insurance policy, consider test driving plans from Progressive, Allstate, the Hartford and others who offer “pay-as-you-drive” or usage-based insurance plans. These can keep car insurance costs affordable for families with teen drivers, says Billy Van Jura, a veteran insurance broker in Poughkeepsie, N.Y. Thanks to an on-board data collection device provided by the insurer, the policy can be written based on the driving time and mileage the vehicle clocks along with the driver’s habits (like speed traveled and slamming on the brakes). “So premiums are tailored to the specific driver instead of estimated miles driven,” says Van Jura.
Savings: Discounts vary by car insurance company but can be as much as 30 percent. According to the National Association of Insurance Commissioners (NAIC), the U.S. car insurance average annual premium is $907.38. Shaving 30 percent off of that can save a family of four $272.21.
2. Bundle up.
Van Jura says several carriers, including Progressive, American Family and Liberty Mutual, offer a multi–policy discount of 20% or more if you purchase two or more policies. A family that insures any combination of two or more cars, homes, boats, etc., with the same insurance company could save a bundle.
Savings: Around $270 or more, depending on the coverage limits, driving history, etc.
3. Pay up front.
If you’ve got the cash on hand, paying the entire car or home insurance premium up front instead of quarterly or monthly will pare down the premiums. Carriers like Progressive, Safeco, Travelers, and many others shave as much as 10 percent or more off annual premiums when you pay up front. You may also snag an additional savings for setting up automatic payments from a credit card or bank account, says Van Jura.
Savings: A 10 percent discount trims $90.73 a year off car insurance. The Ohio Insurance Institute says the U.S. average homeowners premium is $968; slicing off 10 percent saves $96.80 on home insurance premiums.
4. Stress safety.
If you’ve got a stellar driving record, knack for obeying traffic laws and practices and/or good safety around the home (working smoke alarms, a fire extinguisher, etc.), brag about it to your insurance agent. That safe driving record, completion of a recent defensive-driving course, installation of a home security system or presence of smoke alarms or other fire protection (sprinklers, extinguishers, etc.) is often rewarded with up to a 10 percent discount on annual premiums.
Savings: $90.73 on car insurance and $96.80 on home insurance premiums.
5. Consider a Health Savings Account (HSA).
Carrie McLean, senior manager of customer service at eHealthInsurance.com and one of a small handful of people in the country licensed to sell insurance in all 50 states suggests looking at an HSA-eligible health insurance plan, and opening a Health Savings Account (HSA), especially if you’re not a frequent user of health care. “HSAs can only be used with qualifying high-deductible health plans, but they allow you to save money on a tax-advantaged basis for future medical costs,” she says.
Money not used in one year will roll over to the next and can earn interest tax-free. “The contribution limit for HSAs in 2013 is $6,450 for family coverage; adults age 55 to 64 can contribute an extra $1,000 per year,” says McLean.
Savings: Up to $6,450 tax-free per year for future medical costs. McLean says our family may be able to save a bit more on health insurance premiums too, since HSA-eligible plans tend to be slightly less expensive than traditional plans.
6. Keep up with inflation.
Many home insurance carriers offer discounts if homeowners adjust the amount of their home insurance to keep up with inflation. The discount varies by carrier, but could be up to 5 percent.
Savings: It might not sound like much, but a 5 percent reduction off the average homeowners policy of $968 saves $48.40 a year.
7. Consider short-term insurance rather than traditional health insurance while waiting for 2014
A family in excellent health might want to consider switching from long term to short term health insurance. Réne Girard, owner and founder of InsureMyParts.com, says although short-term plans typically don’t cover things like pre-existing conditions, preventive care, or prescription drugs, they can still provide valuable protection in case of an unexpected injury or illness. “They’re generally less expensive than a traditional major medical health insurance plan.”
Savings: According to data reported by eHealthInsurance, the average monthly premium for a family buying a major medical health insurance plan was $412 per month. “By comparison, the average family premium paid for short-term coverage was $153 per month, which is $259 less per month” says Girad. In one year, a short-term heath plan could save up to $3,108 on health insurance premiums compared to a traditional major medical plan.
8. Quit smoking and slim down.
When you fill out a health insurance application you’re asked to indicate if you smoke, your height and weight. Because of the increased risk of heart disease, stroke, cancer and other health maladies, it’s no surprise that those smokers, as well as those who are overweight, pay more for insurance. “Smokers pay an average $26 more per month for health insurance. People with a BMI in the ‘obese’ range pay an average $38 more per month than those with a BMI in the “normal” range,” says McLean.
Savings: Quitting smoking may save an average of $312 per year and ditching that spare tire could save up to $456 per year – for a total annual savings of $768.
9. Think twice about keeping children on a group plan.
The Affordable Care Act allows parents to keep adult children on the family health insurance plan until they turn 26. While it sounds great for some young adults, this isn’t always cost effective. McLean says healthy, young adults may be able to buy coverage more affordably on their own than what their parents will pay for coverage.
For example, once the kids turn 18, keeping them on the family health plan could cost an $175 (or more) per month. “The average monthly premium paid for individual coverage of an 18 to 24-year-old is only $132,” says McLean.
Savings: Once a teen turns 18, parents can save as much as $516 per year in health insurance premiums by getting them their own health plan.
10. Don’t pay for duplicate insurance.
Before going on vacation, Van Jura suggests contacting your auto insurer and credit card issuers to understand what coverages can be declined at the car rental counter. “You may be able to decline all of them because most credit cards have rental coverage built in if the car is rented using that credit card. And a car insurance policy may also offer coverage for a rental car,” he says.
Same goes for car insurance add-ons like towing which may already be available through AAA membership or by the car manufacturer if the car is new.
Savings: One week of rental car insurance purchased through the rental agent can run $70 or more. If your family takes two vacations a year, that’s a savings of $140 or more.
Total savings: $11,947.67
Photo credit: Getty Thinkstock