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You Can Help Control The Cost Of Home and Car Insurance

By Erik Folgate

Ever since the Hurricane Katrina disaster and the devastating hurricanes in 2004 and 2005 in Florida, insurers have received quite a bit of criticism for their business practices and consistently raising the cost of insurance premiums. The cost of car insurance also continues to rise. Insurance companies have really screwed up in the past. State Farm was caught using one engineering report to justify their position on multiple claims that the damage was due to flood not rain water. All of the major insurance companies in Florida have dropped more than 50% of their homeowner’s insurance business forcing people to look to the government for an expensive alternative. But, instead of sitting around and complaining about how horrible the insurance companies are in this country, I have some ways for us to help control the rising insurance costs. Yes, it is a fact that responsible consumers will make an impact on the cost of insurance over the long term. We can’t control whether a hurricane hits or a tornado rips through a town, but we can control the way we maintain our homes and cars.

Be Honest.

Be an honest consumer. It sounds so simple, but it’s very hard to be honest when the insurance company hands you a check expecting you to make the estimated repairs. I am going to give you a tip that would revolutionize the cost of insurance if we all adhered to it. Here it is: Give back any extra money left over after making repairs. Adjusters won’t estimate your cost to make repairs to the penny. If they give you $5,000 dollars and you made all of the repairs to your home, then the right thing to do is send a check back to the insurance company for the remaining amount. Insurance companies very rarely follow up with claims to see how much the actual repairs cost the insured. If you give back any money not spent on the claim, the insurance companies expenses will decrease and they will not feel so inclined to request a rate increase. Plus, they won’t have any proof to justify a rate increase if the state sees a large indemnity reimbursement from insureds. Many people will keep the extra money to pay themselves back for the deductible. I understand that you pay a premium every year, and it’s no big deal to pay yourself back the deductible. But, it’s dishonest and not ethical. There’s no other way to look at it.

Consult your friends and family before filing a claim.

Insurance companies will tell you to report all damages to them when they occur. They don’t really mean this, or else they wouldn’t attach a deductible to the policy. Insurance companies tell you to report all incidences that cause physical damage, because they do not trust the public. They fear that you will not get the repairs done, and then if you have a more serious claim, you won’t be honest about the prior damage not related to the current claim. Again, it all comes down to honesty. My suggestion is to consult your friends and family if you have an incident that causes minor physical damage to your home or car. Evaluate whether or not the damages will exceed the amount of your deductible. If not, don’t file the claim and take care of the damages out of your own pocket. This will greatly decrease the cost of doing business for insurance claims centers. Every claim filed has an added expense to it no matter how small or large the payout is for the claim.

Do your best to maintain your car and home

Many claims occur because of a lack of maintenance on the part of the insured. A homeowner’s policy will typically not pay to repair a leaky pipe, but it typically will pay to make any repairs for the resulting water damage. Most pipes are not visible to the homeowner, but yearly check-ups from a plumber are rarely thought of by homeowners. Cleaning out the Air conditioner drain pipes, replacing a roof before it starts leaking, or replacing a water heater before it breaks down and possibly floods the house, are all ways to maintain your home and help prevent potential claims.

We all know the benefits of maintaining our cars. Your car will function better if you maintain it regularly, and this will help you stop quicker, steer better, and have overall better control of your car. It’s easy to assume that maintaining your car can help prevent accidents.

Buying hurricane shutters, anti-theft devices, and upgrading your fire alarm system are all upgrades that can help to prevent further damages to your home and car. I know what you’re thinking, “Why should I try to help out the insurance company? What have they ever done for me?” Well, nothing, if you’ve never filed a claim, but that’s not the point. The point is that insurance companies love to pass off their added expenses and higher claim payouts to the consumer. If they spend less money on claims in a given year, they will have less justification and proof to support that they need to raise their rates.

Now, imagine if we were just as responsible with our own health? Would it reduce the cost of health insurance? That’s something to think about and comment on below.

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

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