17 Ways to Save Money on Insurance

by David Bakke

saving money insurance
The following is a guest post from Joel J. Ohman. Joel Ohman is a Certified Financial Planner with an entrepreneurial bent that owns a health insurance agency in Florida and 3 Internet companies that hold a portfolio of different financial websites to help consumers compare the best rates on insurance, loans, and credit cards.

Learning 17 different ways to save money on insurance might not necessarily make you the star of the next party you attend (unless it’s a convention for insurance agents) but chances are that if you read through all 17 of these tips then you will find at least one thing that will save you $100 or more – if not now then definitely sometime down the road. Let’s jump right in and start going through some quick tips for keeping great insurance while paying as little as possible for it.

1. Auto Draft – Many insurance companies (especially auto insurers) offer a discount of around 2% if you sign up to have your premiums automatically deducted from your checking account or debit/credit card when they are due. This feature is actually beneficial even if it didn’t save you money because it forces you to pay right on time with no late payment penalties, saves you the time and hassle of having to remember to pay the bill, and allows for easier budgeting. Bonus Tip: If the insurance company will let you auto schedule payments from a credit card then use a cash back credit card that offers at least 1% cash back to save even more (some companies will only offer the auto pay discount for payments from a checking account rather than credit card so be sure to find out the details before you begin scheduling payments).

2. Choose Individual Health Insurance – Something that many people do not realize is that typically individual health insurance purchased in the private market is about half of the cost of a similar group health insurance product that is provided by an employer. The reason that most people do not realize this is that usually an employer will pay for all or most of the group health insurance premiums and the employee never even realizes what the total cost is. The main catch with an individual health plan is that one must be fairly health to get approved onto coverage while group plans are required to accept everyone onto coverage no matter what their current illness is (once you understand this then it is easy to see why group plans are so much more expensive).

3. Split Up Family – No, No, No. Before you think that I am telling you to get a divorce all I mean by “split up family” is that if you are in the enviable position of having an employer pay for all or most of your health insurance premiums through the company plan then of course you should stay on the group plan because after all that’s free money being offered to you in the way of health benefits BUT if your employer is not offering to pay for the health premiums to add your spouse and kids onto the company plan then unless someone in your family has major health issues then you can likely save a lot of money by comparing health insurance providers out on the private market and purchasing an individual health insurance plan.

4. Choose an Independent Agent – When it comes to choosing a health plan on your own it can be quite complicated. Venturing out into unfamiliar territory without a trusted ally to guide you can end up costing you a lot of money in paying too much for a plan or in buying unnecessary coverage. One common misconception that accompanies shopping for health insurance is that one can get a “better deal” or lower price depending upon who they buy the policy from. The fact of the matter is that health insurance prices are regulated by the state and no matter whether you buy an particular policy from an agent online, an agent down the street, or directly from the insurance company itself the prices for the exact same policy have to be exactly the same by law not matter who you buy the policy from. Given this fact it is to your advantage to work with an independent health insurance agent or broker that can help you compare plans from many different companies and find the plan that is best for you.

5. Combine Auto/Home – This discount is called the “multiple lines discount” and is available from most property & casualty insurance companies to policyholders that purchase both auto and home insurance from the same company. This is a popular discount and you have likely heard of this one before but it is worth bringing some attention to this discount because A) The discount can often be somewhat substantial at around 15% and B) It is easy to forget to factor in this discount when one goes out and shops around and compares quotes from many different quotes.

6. Compare, Compare, Compare – The more quotes you compare the more money you will potentially save. Just imagine that if it takes you 10 minutes to compare car insurance quotes from 3 companies and potentially save yourself $100, it takes you 20 minutes to compare quotes from 6 companies and potentially save yourself $200, or it takes you 30 minutes to compare quotes from 9 companies and potentially save yourself $300 then why not spend the full 30 minutes and essentially make $600/hr? Getting a car insurance comparison is especially crucial because car insurance rates can change often and you usually want to make it a point to compare rates at least once every 6 months just to make sure you still have the best rate.

7. Buy a Security System – Almost every single homeowners insurance company offers a discount for having an alarm installed and activated in your home. You may even find that even if you have to buy a brand new system for your home that you can almost break even just because of the cost savings from the reduction in your home insurance premiums. Granted, you probably won’t be able to fully breakeven and recover all of the cost of the security system but at least you will feel safe and secure in your home and your home insurance rates will drop by about 10%.

8. Get Good Grades – This discount has been beaten to death by most because I am sure that most of us are aware of the discounts on auto insurance that are given to students that get good grades (typically a “B” average or better constitutes “good grades” in the eyes of most insurance companies although most of my old accounting professors would probably have a different opinion  ).

9. Consider an HSA – Health Savings Accounts are one of the absolute best ways to not only save money on your health insurance because of their required coupling with a low premium high deductible health plan (HDHP) but also because HSA’s offer tremendous tax benefits. Everything you contribute to an HSA (up to IRS limits which are adjusted annually for inflation) is able to be deducted as an above the line deduction on the front of your 1040 with NO income phase outs (so the more money you make then the more beneficial your HSA contributions become), the money in the HSA grows tax free and comes out tax free so long as the money is used for qualified medical expenses, and the money can even be used for retirement once you reach the age of 65.

10. Itemize with LTC – If you own a long term care insurance policy then you may be able to deduct a portion of your premiums as an itemized deduction on your personal income tax return. This is a commonly overlooked deduction that although not that substantial will still result in extra dollars in your pocket.

11. Shun Copays – Many people choose a health insurance plan with a copay option for prescriptions and Doctor visits simply because that is what they have come to expect in a health plan. Everything else being equal a plan without a copay will be cheaper than a plan with a copay and chances are you probably wont even miss your copay all that much. Copays for prescription drugs are becoming increasingly irrelevant because of the low prices at Wal-Mart and other places on many of the most often prescribed prescription drugs. Copays for Doctor office visits can be a good thing if you have kids that need to go to the Doctor often for checkups but if you plan on only going to see the Doctor just once a year for your annual checkup then you may just find that you will end up saving quite a bit of money if you choose a cheaper no copay plan (just make sure that your plan is a comprehensive plan that still covers prescriptions and Doctor’s visits just that you are required to first meet your deductible for everything rather than having a copay off of the bat).

12. Stay Away from Discount Plans – You may think that you are saving yourself some money if you opt for a medical discount plan instead of a true health insurance plan but all that you are doing is setting yourself up for a financial disaster if you ever develop a major illness. Medical discount plans are NOT real health insurance and while $10/month may sound too good to be true – it really is too good to be true. If you are young and healthy then you can find cheap individual health insurance for as low as $75/month from a reputable company like United Healthcare, Blue Cross, Humana, etc. and you will get real coverage of up to $3,000,000 or more that comes standard with any major medical comprehensive health insurance plan from a legitimate insurance company. Don’t roll the dice on your financial future with a discount card because even if you break your leg and the full cost is $30,000 then even with a discount from a medical discount card of 20% you are still stuck with a bill for the remaining $24,000. Choose a real health plan and limit your out of pocket costs to a few thousand dollars or less.

13. Do Not Lie – Some people get the bright idea that they can pull one over on the insurance company and lie about their medical history on a health insurance application. You will be surprised about the data that is out there and available for any potential health insurance company to view about you thanks to the Medical Information Bureau (MIB) and your consent for them to search that data when you submit the application. Even if you think that you have gotten away with something by lying on your application and getting coverage for a few months then you should be very very nervous if you ever have a big claim because you better believe that the insurance company will scrutinize your application and make sure that you did not lie about anything when you first applied for coverage. Even with all moral issues aside it is never a good thing for your pocketbook in the end if you lie on your health insurance application.

14. Slow Down – As someone who has personally seen their car insurance rates increase because of a number of speeding tickets (my HEMI does not like to just idle along – but that is something that I am working on  ) I can tell you that you can certainly save yourself some money not only on paying the actual speeding tickets but also with cheaper car insurance rates if you just decide to drive a little slower and stay under the speed limit … or no more than 5 above… 

15. Consider an HRA – If you are a small business owner that offers health insurance benefits to your employees then you might be able to save yourself a boat load of money on your health benefits by utilizing a Health Reimbursement Arrangement or HRA (also called a medical reimbursement plan). Essentially this allows you, the employer, to allow your employees to purchase their health insurance from wherever they like and then you simply reimburse them up to a specified amount (and you still receive the accompanying employer tax deduction). This is beneficial for the employer because individual health insurance is much cheaper than group health insurance and it is beneficial to the employee because they can purchase coverage from any company they like and if they leave their job they can take their health benefits with them. The downsides to the HRA is that it may prove difficult for some employees with major health issues to obtain coverage (although the HIPAA health insurance laws will usually come into play in that scenario and offer protection for the employee).

16. Plan Before Moving – As the owner of an insurance agency that offers Florida individual health insurance I cannot tell you how many times that my agents have spoken to clients from all across the US who are doing the smart thing and researching the price of their health insurance when they move from their current home and retire to Florida. If you are considering moving to a new state or even a new city then be sure and take insurance costs into your decision because location plays a key role determining the cost of insurance. If you take a few minutes to compare homeowners insurance quotes then you may just find out that 2 zip codes that are within 15 minutes of each other have drastically different homeowners insurance premiums.

17. Shop Online – Your time is also worth money and so saving yourself a little time and hassle by shopping around for insurance quotes online rather than driving around and making appointments is an easy way to save yourself some money.

What other tips do YOU have for saving money on your insurance?

{ 3 comments }

1 Kris Cavanaugh November 16, 2009 at 6:56 pm

I knew some of those ideas, but a few others were fantastic advice I hadn’t thought of. Thanks for sharing, David!!

~ Kris Cavanaugh (www.begintoshift.com)
.-= Kris Cavanaugh´s last blog ..Shift Inc. Home Page =-.

2 David Bakke November 17, 2009 at 1:20 am

Kris–glad I could be of help. Thanks for visiting!

3 Lana - DreamFollowers Blog November 17, 2009 at 8:06 am

wow, lots of great tips! Thanks for sharing and thanks to Joel for a great post!
.-= Lana – DreamFollowers Blog´s last blog ..How To Stop Making Decisions Based On Fear =-.

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