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Personal Finance
Money Strategies in Car and Life Insurance

Mike Killian -- How do you save money yet still obtain the greatest coverage? Here are some eye and mind opening ways to better understand how insurance works and what might be the best for your needs.

9 things you can do right now to save BIG on car insurance

You may not realize it, but the insurance rates you pay for your car can vary dramatically depending on the insurance company, agent, or broker you choose, the auto coverage you request, and the kind of car you drive. Thanks to some public information from our friends at Pueblo, other public domain sites, as well as my own articles, here are a number of things you can do right now to lower your car insurance costs.

1. Comparison Shop

Rates for the same car insurance can vary by hundreds of dollars, so it pays to shop around. Ask your friends, check the yellow pages, or call your state insurance department. You can also check consumer guides, insurance agents, or insurance companies.

But don't shop price alone. The insurer you select should offer both fair prices and excellent service. Quality personal service may cost a bit more, but provides added conveniences, so talk to a number of insurers to get a feeling for the quality of their service. Ask them what they would do to lower your costs. Check the financial ratings of the companies, too. Then, when you've narrowed the field to three insurers, get price quotes.

2. Ask for a higher deductible

Car insurance deductibles represent the amount of money you pay before you make a claim. By requesting higher deductibles on collision and comprehensive (fire and theft) coverage, you can lower your costs substantially. For example, increasing your deductible from $200 to $500 could reduce your collision cost by 15% to 30%.

3. Drop collision and/or comprehension coverage on older cars

It may not be cost-effective to have collision or comprehensive auto coverages on cars worth less than $1,000 because any claim you make would not substantially exceed annual cost and deductible amounts. Auto dealers and banks can tell you the worth of cars.

4. Eliminate duplicate medical coverages

If you have adequate health insurance, you may be paying for duplicate medical coverage in your auto policy. In some states, eliminating this coverage could lower your personal injury protection (PIP) cost by up to 40%.

5. Buy a "low profile" car

Before you buy a new or used car, check into insurance costs. Cars that are expensive to repair, or that are favorite targets for thieves, have much higher insurance costs. Write to the Insurance Institute for Highway Safety, 1005 North Glebe Road, Arlington, VA 22201 and ask for the Highway Loss Data Chart.

6. Consider area insurance cost if you are making a move

Costs tend to be lowest in rural communities and highest in center cities where there is more traffic congestion.

7. Take advantage of low mileage discounts

Some companies offer discounts to motorists who drive fewer than a predetermined number of miles a year.

8. Find out about automatic seat belts or air bag discounts

You may be able to take advantage of discounts on some coverages if you have automatic seat belts and/or air bags.

9. Inquire about other discounts

Some insurers offer discounts for more than one car, no accidents in three years, drivers over 50 years of age, driver training courses, anti-theft devices, anti-lock brakes, and good grades for students.

Special Note: For more information and tips on auto insurance and all other types of insurance, call the National Insurance Consumer Helpline (NICH) at 1-800-942-4242

Life Insurance… how much and what kind

Life insurance is not about leaving the kids and grandkids 75% of the free world.

This may not be the most relished article about the insurance industry, but it is what I see and what I believe. It is also a way to avoid being talked into something that perhaps you just plain don't need.

First off, forget about leaving the kids and grand kids a life of ease. That is not what insurance is about. The real purpose of insurance is about you finding what is best for your situation. But to do so you must look at insurance from a very cold and matter-of-fact position.

You must view insurance as replacing the individual as a money machine. That is pretty cold but it is honest. You must also view what other situations exist now or probably will exist when the insurance is needed. The difficult part is constantly reviewing these other situations because as they change your insurance needs may change. For example:

-- Are there other assets that can be tapped such as multiple incomes, savings, IRA, property income, etc.
-- How many dependents are in need and for how long?
-- Is it possible a spouse will remarry?How old are the children?
-- What is the current style of life and is it necessary or desired?
-- Are you debt free or plan to be, or are you over your head in debt and cannot control spending?

These are exceptionally difficult questions which must first be dealt with before you can progress.

But once you have solid answers with all responsible parties, the rest is much less difficult because you now know where you are going and the rest is simply understanding the industry.

Types of Life Insurance

Though there are insurances labeled endowments and annuities (which are very good investments), the two basic types of insurance are whole life and term.

Whole Life -- The appeal is that it builds cash value while offering insurance protection. But no other savings program I know of takes your money, puts it into an account for you but does not allow you to see any of it for 2-3 years. No other program has a negative cash value for years to come. And in future years, since this cash value is supposedly your money and you borrow it, how come you have to pay it back with interest?

The argument is you have life protection while building cash value. OK. Why not spend a lot less and have term insurance and use the extra money in a better investment? Even a very safe mutual fund will yield a far greater return. Or perhaps even pay off debt with what you will save. Now that can yield up to 40% tax free. (See Debt Destroyed By Magic Bullet.)

Is there a good side to whole life? Sure there is. First of all, if you take out a whole life as a youth, rates are very low. Whole life can also protect your future insurability. Rates will not change as you get older. A solid small amount of whole life to cover last expenses could be peaceful to the mind. Whole life is better able to stay up with inflation. But overall, I cannot in good conscience recommend it in most circumstances.

Term Insurance -- Term insurance has limitations as suggested above. It builds no cash value, but it is the least expensive form of insurance available. There are two types of term insurance: straight term and decreasing term.

Straight Term -- as its name implies, straight term exists as is and for the full amount as long as you make payments. It does not increase or decrease the amount of coverage.

Decreasing Term -- again as its name implies, decreasing term decreases as the length of time goes on. This type of insurance is most often used in association of a mortgage or car loan.

But here is a major caution. You must insure the decrease does not exceed the payoff. For example, decreasing term insurance for a 30-year mortgage will not keep pace with the mortgage itself. If the decreasing term insurance decreases over 30 years it is a straight line decrease. A mortgage, however, is not straight line because the majority of the interest is in the beginning. Possibly 75% of the mortgage will still be owed when 2/3 of the decreasing term insurance has passed.

There is one other caution I would suggest. Do not buy insurance from a commissioned retailer, car dealer, mortgagor, etc. Buy the insurance from someone who knows his trade -- a licensed insurance agent. Additionally, do not make insurance part of the retail sale unless you want to pay interest on top of the insurance.

Mike has been an Internet Guide/Writer in the field of Credit/Debt Management for over 10 years. His site was awarded Best Of Net by Forbes Publication from 2000 to 2005 with site visitation doubling to over 500,000 average views per month in the last year. Earning an M.S. in Counseling from Creighton University, NE, and with his Practicum in financial counseling to military families, Mike has offered debt elimination seminars to businesses and community colleges for the last 9 years, has had radio interviews, and has been referenced in numerous publications, both in the newspaper and throughout the Internet financial community. Visit his site at LearnCreditManagement.com for more vital information on debt management.

© 2007 Mike Killian

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The views and opinions expressed in these articles do not necessarily reflect those of College Central Network, Inc. or its affiliates. Reference to any company, organization, product, or service does not constitute endorsement by College Central Network, Inc., its affiliates or associated companies. The information provided is not intended to replace the advice or guidance of your legal or medical professional.