Save Thousands on Insurance
Get the best price for all the coverage you need at every stage of your life.
By Kimberly Lankford, Contributing Editor
From Kiplinger's Personal Finance magazine, May 2007
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Insurance is essential to safeguarding your finances and your family. But over your lifetime, the types of coverage you need change. And the company that offered you the best deal as a single person may not have the most attractive policy after you have a family. We'll suggest strategies to help you choose the right coverage at every stage of your life while saving thousands on your premiums.
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Young and single
Until you reach age 25, auto-insurance premiums can be major budget-busters. But prices for the same coverage can vary by hundreds of dollars from one company to another.
When Keisha Fuller was in her early twenties a few years ago, she decided not to buy a car until she found an auto-insurance policy that cost less than $1,000 per year. The Atlanta woman started her quest at the Georgia insurance department's Web site, where she learned about smaller companies offering good deals. She contacted independent agents to get price quotes (find an agent in your area at www.iiaba.org), gathered quotes from large insurers at Allstate.com and Progressive.com, and used sites such as InsWeb.com and Insure.com, which work with a number of companies. The result: Fuller found a policy that cost less than $900 per year.
And she didn't stop there. She reshops her coverage every six months or so, and last December her premium dropped to $426. "I turned 25, an old accident was removed from my record, and I took an online defensive-driving course from AARP for $19.95," says Fuller. "I also allowed Geico to take my credit rating into consideration. They sent a letter asking permission, and I sent it back with haste because my good credit helped lower my premium."
In addition to car insurance, young singles should have renters coverage to insure their belongings, which can be expensive to replace, and give them liability protection. You should be able to find a policy for just $100 to $200 per year, and purchasing it from your auto-insurance company could earn you a discount on both policies.
If you don't have health insurance through your employer, it's a good idea to buy it on your own. You can generally stay on your parents' policy while you're a full-time student, up to age 25 (rules vary by company and state). After that, you may be able to continue coverage for up to 36 months through the federal COBRA law. Premiums will jump if your parent's employer had been subsidizing the cost. But you can't be rejected for health reasons, so COBRA may be your best bet if you have a medical condition.
You're healthy? You'll probably be able to beat COBRA's cost. Get quotes from several companies at eHealthInsurance.com, or find a local agent at www.nahu.org.
Raising your deductible on individual coverage to at least $1,100 can lower your premium significantly and qualify you for a health savings account. An HSA lets you set aside tax-deductible money that you can use tax-free to pay for medical expenses that aren't covered by insurance.
Young singles don't have to worry about life insurance. You only need that type of coverage when someone is financially dependent on you.
Checklist for Young Singles
Shop for auto insurance; premiums can vary by hundreds of dollars from one company to another.
Buy renters insurance.
Individual health insurance can be surprisingly inexpensive, especially if you choose a high-deductible policy.
You probably don't need life insurance.
When kids arrive
Life insurance becomes essential when you're supporting young children, but coverage is surprisingly inexpensive. A healthy 35-year-old man can get a 20-year, $500,000 term-insurance policy for less than $350 per year, or a 30-year policy for less than $500. Women pay even less. That will give you protection until the kids move out or your mortgage is paid off.
A general rule of thumb is to buy coverage equal to eight to ten times your annual income. But stay-at-home parents need life insurance, too, to cover services the family would need if they weren't around to provide them. To get a more precise idea of your family's needs, use the life-insurance calculator in the Tools & Calculators section of Kiplinger.com.