Every family needs basic insurance coverage, but the premiums must fit into the household budget. The basic needs for family include:
- Home or renters insurance
- Auto insurance
- Life insurance
- Title insurance
Home insurance includes variables that affect the household budget. The most important is the deductable. If a homeowner agrees to cover the first portion of all claims, the premium for the coverage is less. For example, if a homeowner pays the first $1,000 of every covered loss, the insurance company does not have to cover small claims. The homeowner is still covered for major catastrophes, such as a home fire that could run into several thousand dollars of damage. This reduces the monthly insurance premium while leaving the real reason for the insurance in place â€“ covering the costs of a major loss.
A renterâ€™s policy covers personal property inside the policy owner’s rented premises.
Auto insurance is similar. Reducing the monthly insurance premium for auto insurance can be accomplished in a couple of ways. As with home insurance, a car owner can elect to pay for the first portion of any claim. A $500 deductable, for example, will reduce the claims the insurance company must cover and they will then reduce the premium for the car owner. This feature will reduce the premium cost in a familyâ€™s household budget.
A further possible reduction in car insurance premiums can come from the comprehensive insurance for an ownerâ€™s car. Car insurance can cover both the loss to the other party in an accident as well as the loss to the owner. If an ownerâ€™s car is older and of less value, the potential coverage for the ownerâ€™s car may not be enough to warrant paying for that portion of the policy. Compare the cost of the comprehensive portion of a policy to the potential benefit that you would receive if the car was damaged or completely lost. Reducing the comprehensive portion of the policy still leaves the primary requirement for protection for the other party in place.
Buying life insurance for the family should include less expensive term life insurance. Some future expenses will be met and don’t require life insurance coverage for the rest of your life. College expenses, for example, are a major cost but aren’t needed past a certain time. Buying term life insurance for that precise need will result in a lower premium and can reduce the cost of insurance in a household budget.
Finally, although it occurs only once or twice in a lifetime, most families purchase title insurance when the buy a home. Examine whether you can carry over the policy carried by the previous owner.