How to Save on Insurance Premiums
As we live our lives we are faced with different risks that can stop us from achieving our goals, dreams and being able to fulfil our needs.
Examples of these life risks include death caused either by natural occurrence or accident. Death is not the only risk that we face. Some accidents and critical illness don’t always result to death. Some people end up partially or totally disabled that they can no longer fulfil their obligations in life such as working in order to survive or to provide for their families. In extreme cases, they even become burdens to their loved ones.
Aside from life risks, we also deal with those associated with our properties in cases of fire, earthquake and flood. We also have risks when we own and drive vehicles in terms of collisions and damages.
All these risks cost money, and can sometimes be very expensive for us to write a check for. One of the best ways to deal with these kinds of risks is by getting the services of insurance companies. However, premiums can sometimes be expensive based on many factors.
Factors Affecting Premiums
In terms of life insurance, Health Maintenance Organisation (HMO) and critical illness coverage, premium is based on the age, health status and the kind of occupation that people have. It goes without saying that younger people tend to be healthier and may live longer than older people. Thus, insurance premiums of younger people are much cheaper than premiums of older people.
Accident insurance, on the other hand, is based the occupation of the person. Less risky occupation have lesser premiums as compared to the riskier ones. For example, people who are office based are less likely to encounter an accident as compared to people working in construction.
In terms of properties, premiums are affected by the location and the surroundings of the property. In terms of vehicle insurance, premiums are affected by the age of the vehicle and how it is being used. Vehicles used for business normally have higher premiums as compared to vehicles for personal use.
Here are creative ways on how you can save on insurance premiums.
Consider term insurance
Term insurance is the cheapest kind of insurance because it is pure insurance and it does not build up cash values unlike in whole life insurance or variable universal life. With term insurance, you are only paying for the insurance coverage. The only time you get to use it is when you need it.
In cases of life insurance, your beneficiaries get the value of your insurance upon your death.
Non-life insurance is term insurance. In the cases of car or property, you get the benefit when you file for claim in instances like collision or fire. In cases of HMO, you get the benefit when you go see a doctor or when you get confined.
Term insurance is also time based. Non-life insurance such as property, car insurance, HMO and accident insurance, contract is applicable on a year-to-year basis. In terms of life insurance, choices range from 1 year, 5 years, 10 years, 20 years or even upto age 65.
Maximize Your Group Insurance Coverage
One great way to save on life insurance, HMO and coverage on critical illness would be to go for a group insurance. This works best when you work in or you own a company, and when there are more people enrolled into the insurance policy.
Since group life insurance coverage is based average age, you can leverage on it especially when most of the members of the group are young. Group term insurance is still cheaper than term insurance because it’s like buying the insurance whole sale.
Match the Coverage to Your Needs and Compare Options for Your Life Insurance
Most insurance companies now offer variable universal life insurance (VUL), which is a versatile insurance product and has the components of both insurance and investment.
Ask yourself – what is important to you about getting this life insurance coverage? Depending on your need, you can match it with the right combination of insurance products.
It’s always best to get a high insurance coverage for yourself. But if you are tight on cash, you may need to reduce the amount of coverage that you’re getting. In this case, seek the help of your good and trusted financial planner and have him or her assess your needs through gap analysis.
He or she may present to you solutions to your different needs. I would then recommend that you rank them according to priorities. For example, if you are a bread winner, one option would be to get a coverage that would allow your family to survive for 5 years should you die. That should give your spouse 5 years to find ways to augment the income lost.
If you’re single and no one depends on your income, you may focus first on your critical illness coverage. Should you be diagnosed with a critical illness, you get to receive a lump sum amount from your insurer to help you go through your situation.
Shop around and request for quotes from different insurance providers
Different companies have different strategies and pricing. If you’re saving on premiums, it would be best to ask for different quotes, do some mixing and matching of policies. Get quotes from at least 3 different companies and review them carefully. Compare what they offer as compared to the benefits that you will get.
Make sure you deal with agents or brokers that know and trust. Because in times of claims, they can also provide you with assistance. Since many people get into the insurance industry, many also leave. Make sure that you deal with reputable ones.
There are different kinds of agents. Those who are direct to the insurance company are required by the insurance commission to have a license to sell. Licensed life insurance agents have their license dedicated to one life insurance company. Licensed non-life insurance agent can represent 7 different non-life insurance companies.
There are also agents who don’t have personal licenses but are accredited with licensed insurance brokers. These insurance brokers represent multiple life and non-life insurance companies.
Make sure that you also research the company. You may have saved on premiums but if you end up not being able to claim or being hassled during claim, then it may not be worth it.
Raise the deductible or participation fee in your non-life insurance
When you insure your car or your property, there is normally a participation fee or a deductible fee. This fee usually range from 0.1% to 0.5% depending on the company and on what you’re insuring. Some insurance companies charge a fixed deductible of P2,000 for cars and P3,000 for SUVs or bigger vehicles.
This means that in the event of claim, the insurance company will either deduct the participation fee first before they pay the claim, or you will pay first for your participation, then they will pay the rest of the agreed amount. For example, you file a claim from the insurance company because your car collided with another vehicle and the total amount is P15,000. The insurance company will pay P13,000 while you pay P2,000.
Insurance companies charge participation fee so we, as owners of the vehicles, will take utmost care of the vehicle and will not crash the vehicle intentionally just so we can make money from the insurance company.
Deductibles also apply to HMO coverage. Some HMO companies offer discounts on the premium when you agree to pay for the first 20% of the medical expense. This is also called co-payment.
Take Good Care of Your Vehicle and Avoid Claims as Much as Possible
Having claims increase your premiums as well. Do your best to avoid risks. It will help keep your premiums at a steady pace. Also, when you find some dents or scratches that need to be repaired, it would be best to consider the cost of repair first before filing a claim. Sometimes, the repair will only cost about P2,000 or P3,000 only, which is the same amount as your deductible or participation fee.
Consider the Vehicle You Drive
The more expensive the vehicle, the more costly the insurance premium because the value that it is covering is also high. The inverse is also true. The lesser the value of the vehicle, the lower the premium amount. You also get to save on premiums this way.
In some cases, when your car is fully paid or when you bought your car in cash, you may opt to reduce the amount to be covered by insurance to a lower amount. For example, if you bought your car for P1.2 million pesos, then you may request for a quote to cover P800,000 only and yet keeping the amount in bodily injury to P500,000. This means that when you car has been wrecked totally in an accident, you only get P800,000 instead of P1.2 million. On the other hand, when you claim for repairs, you only have a limit of P500,000.
You also get to save on premium on newer vehicles as compared to older vehicles. This is because older vehicles are more prone to repairs and damages, and parts may not come by easily as compared to newer vehicles.
Reduce Chances of Risks in Your Property
Insurance companies normally do an ocular of your property before it covers it for fire insurance. They check for “possible” reasons that may cause fire. When they see your house is clean, neat, made of quality materials that are not easily combustible, you have fire extinguishers, you use electric stove, among others, then they give you a good rating where you pay less premiums.
If you’re buying a new property or moving to a new location, make sure to check the neighbourhood first. Check the nearby surroundings and make sure it is safe and won’t easily be caught on fire. That will also improve the rating and reduce the premiums.
You may think that buying insurance is expensive. However, when the time you need it arises, you get to maximize it. Treat it like the spare tire in your car. You want to have one, but you never want to use it.
Also, get life insurance while you’re still young and in good health. It is not just you and your money who decide on your coverage, but your health. When you are already sick or you are not healthy anymore, premiums are already expensive or worse, you may not be covered anymore.