Perhaps you are paying premiums on insurance to cover your life, your health, your car, your home, or to cover commercial properties you own. How long has it been since you asked whether or not your insurance needs have changed and whether or not you are now over insured in some areas? Periodically it’s good to review these things.
Recently I downsized my life insurance coverage by half. This lead to a lower life insurance premium and more cash in my own pocket each month. My children left my home ten years ago. Furthermore, my retirement income is now provided for and my home is paid off. Why then, I asked, do I need a huge insurance policy to provide for grown children, to pay for a retirement that is already in place, and to pay off a mortgage on my home that no longer exists? I realized that I was over insured. I downsized to an amount that will help with estate taxes and burial when I die. The rest is unnecessary. The difference in premiums will either go into savings or be used for more vacations.
I know an elderly man who carries no life insurance. His wife is provided for in the event of his death as he has created an income for her through real estate and stock investments that is more than sufficient for her needs. They also have other savings in place. He no longer needs life insurance to provide for her in the event of his death. He is self insured.
A friend of mine recently began to consider the fact that he has half a dozen different commercial buildings that are all insured by different agents, but most with the same company, State Farm. He noticed that year after year his premiums were climbing. He began to question these increases and asked whether or not his insurance costs needed to escalate year after year.
His questioning led him to formulate a plan to address the escalating costs. His plan included the following components:
1) List all the properties, the insurance companies, the amount of insurance needed, the current insurance amount, and the premium being paid.
2) Identify a short list of insurance brokers and companies to talk to about his list. Provide them only with the information he wanted them to have.
3) Ask each broker to provide him with a plan to help control costs and provide appropriate insurance.
4) Examine each existing policy with an eye towards savings.
5) Once he has received proposals from each broker he will begin to make changes to his existing situation in order to improve his situation.
One of the things he realized when examining the insurance he was paying for on a 10,000 square foot office building he owned is that it was over insured. The office building carried no mortgage; so there was no finance company to satisfy. Furthermore, after a discussion with his builder he realized that he could replace the entire building for $1,100,000 in the event it burned to the ground. $350,000 of his original cost on the building was for land. He found that he was currently insured for $1,600,000 for building replacement, about $500,000 more than he needed. Just reducing the amount of building replacement insurance could save him 29% on his premium while still providing adequate insurance. Over the years the insurance company had quietly increased the building coverage as per a clause inserted into the policy that escalated that part of the policy each year. This understanding helped my friend to realize why his premium escalated each year. He plans to downsize the amount of coverage he has on the policy.
There is little doubt that when my friend completes his analysis and selects the company and policy that he will get a good outcome for himself. He fully expects to reduce his annual premium on the building mentioned above by about 29%. Over the years that can really add up. Imagine the savings he might enjoy if he multiplies a similar result over all of his buildings. If he invests the money saved he may, over time, become self insured on one or more of these buildings.
Furthermore, he is looking for an umbrella policy to extend over all of his properties. He is also considering insurance that is less than replacement cost for some of his properties where fire walls exist that should limit destruction in the event of a fire. Since he has no mortgage on some of his properties he is in a position to decide how much insurance he really wants, rather than how much the finance company requires or the insurance company suggests.
Since he has built up a war chest of cash he is comfortable raising his deductible amount on each policy. Gradually he is moving towards becoming ever more self insured.
He has also taken steps to make certain that each building has a supply of fire extinguishers and/or that other fire prevention and fire suppression gear is on hand.
This year I eliminated my disability insurance policy and its premiums and began to consider long term care insurance instead. Times change, needs change, products change. It’s time to reevaluate your needs.
Over time your situation will change. Periodically it makes good sense to reevaluate your insurance needs relative to your new situation. You will likely find areas of opportunity for savings as you investigate and examine your situation, your policies, and your future needs. Take the time today to do your homework and create a plan for reducing your premiums and improving your overall insurance situation. Good insurance brokers can help you though this process, but realize the more they sell you, the more they make. Keep your goals and needs firmly in mind when buying insurance, and don’t buy more than you need.
Investing in real estate, stocks, bonds, and precious metals is risky and could result in losing money. I am offering ideas for your consideration and education. I am not offering financial advice. Please do your own due diligence and study before making any decision to invest. I am not an investment adviser. Precious metals is not for everyone. I am a precious metals broker and sell precious metals. You should do your own due diligence when making investment decisions of any kind. You should consult your own financial advisers before making any investment decision. I make no guarantees that by following any advice or suggestion I make that you will realize any return or that you will not see losses. Beware, all commodity markets and other markets carry risk of loss.