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Evaluate Your Insurance Policies When Money Is Tight


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When money is tight, it is a good idea to review your budget for expenses that you are able to cut back on. One category that you must pay close attention to is insurance. With this in mind, it is important to note that some policies are more important than others. While you may be able to cut back in one area, keeping the same coverage in another is essential to the well being of you, your family, and your finances. Knowing what coverages you should have more of and can cut back on is the tricky part. We recommend that you consult with your insurance agent and another professional with an unbiased opinion before canceling, reducing, or adding any coverages to your insurance policies.

Here are several tips for buying/paying for insurance when money is tight:

1. Make a list. What types of insurance are you paying for every month? How much is this costing you? If you have a detailed list you will be able to see where your money is going, which will in turn make decisions easier on you in the near future.

2. Cut back on coverage, but don’t get rid of everything. Your first instinct may be to cancel an insurance policy so that you can save the entire amount of your premium. While this can work in some cases (which are discussed below), it is not always the best idea. Take auto insurance, for example. Although it is mandatory in all 50 states, the amount of coverage that you have to carry will change based on your location. For example, I live in Pennsylvania. My auto insurance requirements are as follows:

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Bodily Injury Liability: $15,000/$30,000 Limit

Property Damage Liability: $5,000 Limit

First Party Benefits (PIP): $5,000

However, we suggest that you don’t be cheap on Liability and Property Damage coverages. We recommend 100,000/300,000 limits and at least $25,000 on property damage liability for the average driver. If you have an older vehicle, you may be able to opt against collision coverage and stick with liability only. This alone can save you a lot of money every month. The reason for this is because you might end up paying more in collision coverage than the car is worth repairing. With the money you save, set up a separate “Cars” savings fund and stash away that money every month so if you do ever get in an accident that’s your fault, you can replace your car.

If you are interested in learning more about the requirements in your state, contact your insurance provider or visit

3. Cancel it altogether. You have to be very careful with this, but it is an option to consider especially when dealing with a type of insurance that you do not necessarily need. If you plan on keeping your car, you need insurance for it. The same holds true with your home. Not carrying home insurance is a risk that you don’t want to take, and if you have a mortgage, the mortgage company almost always requires it, anyway. Some insurance coverages to consider dropping if you carry them are pet insurance, dental insurance, vision insurance, and any kind of supplemental insurance like AFLAC.

But what about life, health, and disability insurance? This is where the questions come into play. Take life and health insurance, for instance. While you are not required to carry coverage in some places (not yet, at least) getting rid of your policy is a big mistake. Even if you plan on picking up coverage again in the future, you are going to take a huge financial hit.

Consider a 40 year old male who purchased whole life insurance at the age of 25 for $100/month. If he keeps this policy active he will be able to pay this amount year after year. But if he cancels and buys again in the future, getting the same level of coverage at an identical price will be next to impossible. The same holds true for level term life insurance. The older you are, the more expensive it will be if you drop it now. Even if the law does not require that you carry a particular type of insurance, you really need to think long and hard about canceling your policy. It may save you money now, but in the future it could lead to financial disaster.

4. Talk to your agent. Tell him what you are going through, and what you are trying to accomplish in terms of your budget. You may be surprised at how many products are available. Your agent may be able to switch around a few details and offer similar coverage at a lower price. Remember, you are never going to know if you can save until you ask.

Talk Insurance Agent

5. Make a change. Rather than cancel your policy and hope that it doesn’t come back to bite you, why not begin your search for another provider? With this, you may be able to keep the same coverage while saving a lot of money.

If you are interested in making a change, you can receive quotes in a few ways. First off, you can call agents from different companies and ask for information. This used to be the most popular way of doing things. On top of this, you can hire an independent broker to go out and find you the best deal. Your final option, and the one that most people are relying on, is using the internet to request and receive quotes. In addition to visiting individual sites, you can also receive insurance quotes from third party providers such as: The General, Auto Insurance Locations, 2insure4less, CompuQuotes, and InsureMe.

Money may be tight in your household, but that doesn’t mean you should cancel all of your insurance policies. Make sure you have adequate car, home (or renter’s if you rent), health, and life (if you have dependents) insurance coverage that will prevent you from a huge financial disaster. Some alternative insurance policies are more of a luxury, and you can consider dropping those and merely self-insuring yourself by setting up a separate savings fund. Insurance is a necessity, but like everything else you purchase, you must be an informed consumer and make sure you get the best deal for the amount of coverage that suits you best.

Chris Bibey is a freelance writer who over the years has honed his personal finance experience by writing more than 100 feature articles on the subject. In his spare time, Chris enjoys sports - West Virginia football in particular!