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June budget buster: Insurance policy renewals

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I must respectfully disagree with T.S. Eliot. For me, June is the cruelest month, at least financially.

This month we had the summer heat kick in, meaning more air conditioning and higher electric bills.

We also had increased watering of the spring-planted marigolds, nudging up that utility bill a notch. Until the city of Austin enlists its own law enforcement officers or the state of Texas pulls National Guard troops off the border to enforce voluntary H2O restrictions, the hubby will not forsake his annuals.

Then there was the already documented laptop purchased in the wake of my crashed computer. Sure, it'll be a tax deduction next year, but in June it was just one ginormous and unexpected expenditure.

Of course, there was the second 2006 estimated tax payment, due June 15. And a couple of stray birthdays this month.

But the real bulge in our June budget was insurance. Both our homeowners and auto policies were due within 12 days of each other.

As I've mentioned previously, we don't have to send a portion of the homeowners coverage with our mortgage payments each month, so we face the yearly bill on our own. I've set up a self-escrow system, putting one-twelfth of our annual policy amount into our emergency savings each month, where it earns a little interest. If the Fed keeps pushing rates up, I may even earn enough in interest to cover a couple of these monthly deposits.

But still, even though it's planned for, it's a shock to take that big chunk out of the account all at once. When we bought the house last summer, that was just one of the many items paid at closing, so we really didn't notice it.

Not so this year. We noticed it big time. All I've got to say is thank goodness it's over for 12 months. And now the process begins again.

Bumper_cars_2 As for the auto insurance, at least it's only a half-year payment. Of course, do the math. That means the other half is due in December.  Maybe the hubby will get a canceled auto insurance payment check with a big red bow for Christmas this year.

Having made these two big payments, I decided a look at how to reduce insurance costs would be appropriate. I'm focusing today on the car coverage. I'll look at some homeowners policy reduction tips in a future post.

The Insurance Information Institute offers nine ways to lower auto policy costs:

1. Shop around, getting at least three competitive price quotes.
2. Consider a safer car, since its insurance costs will be lower.
3. Raise your deductible.
4. Reduce coverage on older cars.
5. Buy your homeowners and auto policies from a company that gives you a price break for the double business.
6. Maintain a good credit record.
7. Take advantage of low-mileage discounts.
8. Look into group insurance possibilities.
9. Ask about other discounts, such as ones for no wrecks or moving violations in the last few years, anti-theft devices on your car, student drivers with good grades and additional safety equipment on your car, such as side airbags and daytime running lights.

There is a 10th way to save on auto insurance. Just follow the advice that your mother always gave you: Be a good driver.

You can get more discussion on each of these premium-reducing suggestions here. Some other good insurance price cutting lists can be found at:

  • Insurance.com's 10+ tips
  • Travelers, which has a good list of discount possibilities, and 
  • Suze Orman's take on this topic, reinforcing many of these same tips, and which FreeMoneyFinance used as his benchmark last month when he was looking at ways to save on his policy.

Good credit means lower premiums? All these suggestions are good, but  #6, the credit report connection, baffles me. I know, more and more insurers are using credit information to price auto insurance policies. Why?

OK, I can see where they can theoretically determine that you'll pay your premiums on time. But how is that relative to your driving?

I've never missed a bill payment and now that I got that ID thief's incursion into my financial life erased, I have a very good credit record. Again I ask, what does that mean about my motoring ability or inability?

Let's say, purely hypothetically of course, that I like to push the speed limit now and then. Where is that indicated in my credit report?

And still very hypothetically, let's postulate that one of the great thrills  of coming from flat Florida to the Texas Hill Country is heading down an incline and seeing just how much speed a for a purely-for-illustrative-purposes-only driver can pick up sans accelerator and before an impending curve requires a tap of the brake. This, and I reiterate, purely speculative roadway situation, is tied to that totally-made-up, hypothetical driver's credit rating how?

I guess that's something I'll just have to ponder the next time I hit the road, driving very safely and well within all laws, of course.

And a red light means … I don't know about the credit rating of the guy in this video, but I do know he's one lucky sucker.

Very fortunate, too, are the bicyclist who was just fast enough to make it across the street and the pedestrians who were just slow enough not to be in this lunatic's way.

Unfortunately, there are a lot of drivers like the moron in the video. So y'all be careful out there if you're heading out on the highway for the Fourth of July holiday.

Comments

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kibitzer

The really important part of this posting was your comment about self-escrow. I encourage everyone to use that approach for all major expenses, not just homeowners insurance. I describe this approach in more detail at http://www.thinkingaboutmoney.com/?p=23

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