When you get an insurance bill in the mail, you probably donâ€™t think twice before paying. After all, insurance is an important part of your personal finances, and you wouldnâ€™t want your policy to accidentally lapse.
But with auto, homeowner, and many other types of insurance, you could get a bill that is quite a bit higher than what you were paying before. It isnâ€™t uncommon to see insurance rate increases of 10% or more. This is why it is important to regularly assess and optimize your insurance to ensure you are paying the lowest rate possible while meeting your unique needs.
Rates Increase Annually
It is not uncommon for insurance companies to increase your rate every year. There are several reasons for this. Sometimes the cost of operating in your state increased due to a catastrophic weather event or a government regulation. Sometimes all customers had more claims overall and the insurance company needs to make up the difference. Other times they are just trying to make more money and assume that you will just pay your bill without asking questions.
The assumption that you will just pay more because changing insurance companies is a hassle holds true for many people. But you care more about your money than the average, so you shouldnâ€™t act like an average person and just pay an increased bill without asking questions.
Sometimes a quick call to customer service can save you money, but other times you might have to look for a new insurance company to save money on your monthly, semiannual, or annual bill.
Do keep in mind that some types of insurance will never lead to a rate increase. For example, if you have term life insurance, the monthly rate is locked in for the entire term of the policy.
You Can Always Shop Around
Just because you have a relationship with an insurance company doesnâ€™t mean you canâ€™t shop around. The insurance company looks at you like a customer, not a partner. They try to improve customer loyalty by offering multi-policy discounts or deals, but ultimately it is all about earning a profit.
Because your insurance company is only as loyal to you as you are profitable, you should look at your insurance company the same way. After getting a whopping increase from a major insurer recently, my family shopped around and found a new company for our car insurance that cost half of what our old policy cost. Half!
Aside from a few minutes on the computer, there is no cost to shop around and compare rates for auto insurance or homeownerâ€™s insurance. Whether you just got your bill or you are midway through a year you prepaid, you have every right to shop around at any time. Shopping around like this usually makes the most sense with car insurance, but you can do the same with a renterâ€™s or homeownerâ€™s policy.
You Can Get a Prorated Refund
If you find a better deal for your needs, you can generally get a prorated refund for your insurance. For example, letâ€™s say you have an auto policy that costs $160 per month. You prepaid $960 for six months three months ago to get a pre-payment discount. Many people mistakenly believe they canâ€™t make a change to their insurance for three months without losing their $480. That is completely incorrect.
If the person in the example above were to find a new insurance policy today for $120 per month, they can sign up and get the $480 refunded from prepaid, unused months at the old insurance company. In this example, you could save $40 per month starting today. You donâ€™t have to wait for your policy to renew to switch insurers and save money.
Your Needs Change, Make Sure Your Insurance Keeps Up
Your needs change constantly. A change of jobs, homes, or a growing family might lead to new or different needs. Thatâ€™s okay. Insurance companies are willing to work with you to meet your needs wherever you are in life.
But sometimes when your needs change, your current insurer is no longer the best choice. Thatâ€™s okay too. In this case, you should shop around and pick a new insurance company that better meets your needs, and your budget.
Outside of customer service, virtually all insurance companies offer the same thing. There is no reason to stick with a company â€œjust because youâ€™ve always used them.â€ Put your budget and your needs first, then choose the right insurance company. Sometimes it is the same insurer youâ€™ve been using for years. Other times, it requires a change. But if you can save money every month, change is worthwhile.
For some purchases, loyalty pays. Sticking with the same doctor for many years, for example, can lead to better healthcare. But you wonâ€™t get better service just for sticking around with an insurance company. Shop around today to see how much you could save. The savings might astonish you.