As money managers and bookkeepers, we understand the importance of optimizing every aspect of your financial life, including your insurance policies.
Insurance is a necessary expense, but it shouldn’t break the bank. Many insurance companies often sneak in hidden fees and unnecessary add-ons, driving up your premiums.
Susie Jose, owner of Carefree Bookkeeping, shares important insights and helpful tips for identifying and squashing hidden insurance fees.
Here are six hidden fees that can stifle your household or business operations budgets.
- Monthly Payment Fees
Insurance companies charge an installment fee when you opt to pay your premiums on a monthly basis. This fee covers the administrative costs associated with processing more frequent payments.
To save money, ask your insurance agent/company about paying those premiums quarterly, semiannually, or annually. The most significant savings typically come by prepaying the entire annual premium.
- Paper Payment Fees
Switching from paper statements to electronic statements and setting up automatic payments can lead to significant savings. By going paperless and automating your payments, you not only reduce administrative costs but also contribute to a greener environment and avoid potential late payment charges. Unfortunately, that’s not always a discount that might be available.
Many companies are going through forced digital access or are doing away with this discount as another way to recoup growing costs on their end. Ask your agent about digital account access solutions and credits.
- Rental Car Reimbursement Coverage
Rental car reimbursement coverage is an optional add-on that pays for a rental car while your vehicle is in the shop for repairs. While it might seem like a sensible choice, it can add up to $175 or more per year to your premiums — that’s an unnecessary cost for those who don’t routinely need that rental car.
Consider whether you truly need this coverage, especially if you have alternative transportation options or a well-funded emergency fund in place.
- Emergency Roadside Service
Emergency roadside service, another optional coverage, assists with issues like towing or flat tire repairs. If you already have roadside assistance through an organization like AAA, you may be duplicating coverage. Plus, AAA and other like services may come with additional benefits that you don’t have through your insurance company for the same price or less.
Evaluate your need for this service and consider dropping it to save a few dollars.
- Return of Premium Riders
Return of premium riders are additional coverages attached to policies that promise to refund your premiums if you don’t use the policy. While this may seem appealing, these riders can add hundreds of dollars to your annual premium. Dave Ramsey wants you to consider redirecting that money towards paying off debt, building an emergency fund, or investing for retirement.
- Accidental Death Riders
Accidental death riders, often offered with life insurance policies, provide extra coverage if your death results from an accident. However, it’s essential to assess whether you need this additional coverage. If you have sufficient term life insurance coverage (around 10-12 times your annual salary), you may not require this costly rider.
Do You Have the Coverage You Need?
It’s crucial to periodically review your insurance coverage to ensure it aligns with your current needs. Having gaps in your coverage can be just as costly to you in an emergency as overpaying for add-ons you don’t need to have right now.
Consult with a trusted local insurance agent and ask for a free policy review.
Do You Think You’re Paying Too Much for Coverage?
Whether you want to pay down debt, boost your retirement savings, or make strides in paying off your mortgage, now is the time to take control of your insurance costs and redirect that extra cash toward your financial goals.
If you need guidance in finding the right insurance coverage and optimizing your budget, consider reaching out to professionals like Carefree Bookkeeping for additional resources and strategies.
REMEMBER – Identifying and eliminating hidden insurance fees is a smart financial move for both households and businesses. By working with a money manager and bookkeeper, you can navigate the complexities of insurance policies and ensure you have the coverage you need without overpaying.