When your financial adviser talks to you about personal finance, he may never talk to you about insurance. Most advisers focus on the investment side of things, but insurance is your financial foundation. Insurance allows you to go out into the world without worrying about unlimited liability for things that might happen to you. By optimizing your insurance costs, you're setting the stage for your financial future - the more money you save here, the more you can invest or spend on things that you truly value.
When you compare car insurance companies, you'll often find small differences in the way each company handles coverage, which in turn drives the way insurers price policies. However, most insurers have at least one thing in common: they will give you premium discounts for bundling insurance policies. For example, if you carry a homeowner's insurance policy, an auto policy, and a personal liability (umbrella) policy, the insurer will generally give you a discount on all three if you let the company underwrite all of them.
Insurers are willing to do this because it means that they are receiving more premium dollars than they otherwise would receive. This, in turn, allows them to invest more money for shareholders (in the case of publicly held companies) or policyholders (for mutual companies).
Insurers also sometimes make money on "the float," which is money that the insurer has collected in the form of premiums but has not yet paid out in claims. The more the insurer can make from this money, the higher its reserves. The higher its reserves, the less money it needs to charge to policyholders and the more competitive it can be in the marketplace.
When you bundle your policies with one insurance company, you save money but you also save time. Why? Because your insurer will itemize your insurance on one bill and send that one bill to you. Often, you can elect to forgo the paper bill and just receive electronic notices. You only pay one bill, once per month. If you ever have to file a claim, if you ever have a problem with service, or if you have any questions about coverage, you only have to call one company. You won't be pushed off onto another insurer and you'll never run into a situation where your company tries to pass the buck onto another company.
One of the most underrated benefits of combining your insurance policies is that you end up with more savings at the end of the month. This means you have more money to save and invest for your future. With Social Security benefits expected to shrink in the future, and the costs of medical care rising, you simply cannot ignore the need for increased savings.
You don't even have to be very savvy with your investments to take advantage of the benefits either. In most cases, combining all of your policies can save you up to 40 percent. If the sum of all of your premiums is $2,000 per year, then you could end up saving $800. That's about the easiest win you'll ever get.
Daniel Flynn is a personal finance expert. He frequently shares his best tips for saving money on personal finance and car insurance companies websites and blogs for Autoinsurance.us.
