Your Insurance Agent isn’t Your Friend so Don’t Put His Kids Through College!
I met with another family this week and as we were dissecting their finances and looking for ways to increase their monthly cash flow, we got on the topic of insurance. More specifically Auto and Homeowners insurance. It was actually a very disturbing to me that they felt almost ashamed to shop their insurance with a different carrier because they felt it would hurt their relationship with their existing agent.
I have no idea why they felt this allegiance to their agent but for some reason they did. In fact, a large number of my clients often act like we still live in the 1950’s when personal relationships actually meant something. Unfortunately, to most insurance companies today you are just a number. While you may have a great relationship with your agent, the insurance company itself is simply a financial institution that you must pay in order to protect yourself from a loss or accident.
After a long discussion, I was able to get this family to shop their auto and homeowners insurance and they were able to save $65 per month! It wasn’t easy and I basically had to help them “reframe” their ideas on their relationship with their agent to get them to see the big picture. The tipping point was that they were trying to save for their 7 year olds college fund but couldn’t find the extra money to get it started.
When I told them to shop their insurance with a different agent, you would of thought I was asking them to punch their mom in the stomach. So I asked them if they would rather have a good relationship with an insurance agent that they hadn’t spoken to in eight months, or, a child that won’t have to worry about paying for college. The answer was pretty easy for them and they eventually saw my logic. Now I know that $65 per month probably won’t cover all of their child’s college but I do know that it’s better than overpaying on your insurance to maintain a relationship with your insurance agent….that’s just financially stupid.
You can basically get the same coverage’s from any insurance company which is why it makes perfect sense to shop for the best deal. Now don’t get me wrong, I’m all about paying for value, so if your insurance agent gives you additional service on top of providing insurance, it may be worth it to pay a little extra. However, if your agent is like 90% of other insurance agents, they aren’t really reaching out to you every time there is a chance to lower your insurance premium and if it has been a while since you shopped your insurance you may be in for a good surprise.
Tips For Shopping Your Insurance
If you are going to shop around on your insurance make sure to consider the following first;
- Insurance costs are related to your credit score so make sure you have optimized your score prior to shopping around
- Always shop your auto and homeowners together to get a bundled discount
- Consider a higher deductible based on your previous claims. If you have never had a claim then raising your deductible can save you some serious cash[/list]
I typically shop my insurance every six months. I have no allegiance to any agent and I actually work with several. Some have better rates for certain coverages and that is why it makes sense to shop around.
Now, with all that being said I’m going to give you my disclaimer. If you decide to shop your insurance and raise your deductible to save money, you are not allowed to call me and yell at me if you have to make a claim with the higher deductible. Also, I tell my clients to set up a separate savings account when they initially make the switch and I instruct them to deposit the monthly savings into that account until they make up the difference between their new deductible and the old one.
For example, if you were to raise your deductible from $500 to $1,000 and it saved you $50 per month, I would have you put that $50 per month into that savings account until it made up the $500 difference in deductible. This way, if something happened, you would be prepared for the higher deductible.
I hope this article helps you save some money and improves your monthly cash flow.