Personal Finance Advice

In most cases, I usually urge people to save money wherever they can.  If you’re buying groceries, take some coupons along.  If you’re buying a washing machine, haggle with the salesperson for a discount.  On the other hand, there is one instance where searching for the cheapest deal may not be the very best route to take: Insurance.

By definition, insurance is designed to pay for covered events.  For example, auto insurance covers the policy owner in the event of an accident or theft.  Homeowners insurance covers the policy owner in the event of a natural disaster.  Health insurance covers the policy owner when medical attention is needed.

Is this really something you want to scrimp on?

It’s easy to bargain shop for insurance when all is well.  When the car is running well, the house is still standing, and you’re in good health it may start to feel like you’re wasting your money each month on insurance payments.  After all, if you have never had to make a claim then you might look at all the money you have sent your insurance company over the years and start to get a little annoyed.  Keep in mind, however, that you’re making your payments just in case.  In other words, you’re saving yourself from financial disaster by making the payments right now.  If your home was to fall to the ground right now chances are your insurance company would wind up paying out much more money than you have ever sent them in premiums.

Don’t stop making insurance payments because you decide they are a waste of your money.  By the same token, you shouldn’t buy the cheapest insurance possible in an effort to save money because the cheapest insurance is pretty close to no insurance at all.

There is a big difference between buying the cheapest insurance possible and finding the least expensive adequate insurance coverage.  When you simply buy the cheapest insurance then you are risking having inadequate coverage.  Some people have purchased policies from the cheapest insurance companies they can find only to discover that when the time came to make a claim they were either not covered for the loss or - worse yet - they discover that the so-called insurance company had closed up and left town.

By all means, do some comparison shopping when looking to purchase insurance.  When you’re conducting your comparisons, however, don’t look only toward the dollar amount you’ll pay each month for the policy.  Examine the coverage offered through the company to make sure the policy is adequate for your needs.  Make sure the deductible isn’t so high that you wouldn’t be able to afford it.  Also make sure that you use a reputable company with high ratings so you know the company will actually be around when you have to make a claim.

After you have found a few companies that fit all these descriptions, only then should you start comparing the costs among the companies to find out which policy costs the least amount of money.

You should consider adequate insurance coverage to be just another facet of your personal financial health.  Without insurance coverage you’re asking for trouble.