Insurance Premiums

We all have important stuff we need to protect, like our house, car, belongings, health, and income. One way to do this is by getting insurance, which basically means passing the risk of damaging or losing these things to someone else.

Insurance costs are in the form of regular premiums we pay, and it can be a big chunk of our household expenses because we insure a lot of things. If we don't keep an eye on these costs, our yearly insurance bills could easily go over ten grand.

For instance, a typical single person or couple might be shelling out anywhere from $10,000 to $15,000 for the usual types of insurance, and that's not even counting kids or other less common insurance policies.

There are a bunch of ways to keep insurance costs down, and one I used is by picking a higher excess on my policy. Allianz explains that the excess is what we have to pay out of pocket before the insurer chips in on a claim.

So, let's say I get into a car accident and need $5,000 worth of repairs. If my policy has a $1,000 excess, I'll pay that $1,000, and then my insurer will cover the remaining $4,000.

Basically, by choosing a higher excess, I'm agreeing to take on more risk myself. I'm saying I'm okay with covering up to that excess amount if something happens. The higher my excess, the less I can claim from my insurer, which means they'll charge me lower premiums because it costs them less. Obviously, before I make any changes, I need to think about how much risk I'm cool with and make sure I can handle paying a higher excess if I have to file a claim.

I did a quick test quote for a new Toyota Camry using a popular insurer. They let me pick an excess between $700 and $1,900. If everything else is the same, going with a $700 excess means a yearly premium of $1,888, but if I bumped it up to $1,900, the premium drops to $1,351. So, I'm taking on the risk of having to pay an extra $1,200 if I make a claim, but I save $537 on premiums, which is 28% less. Even though we talked about car insurance here, I can usually choose excess options on other kinds of policies too.