While the thought of looking over your insurance policies may be one of the last things you want to do with your evening or weekend, it could mean a substantial savings in your total insurance expense. Insurance rates are subject to change, not only because you have a claim, but they are also based on numerous other factors. The amount of paid claims in your area, even if you haven’t had a claim, will impact your rates. Other factors that impact rates are the rate of return on the money the insurance company has invested, the economy, inflation, building and labor costs in your area, among others. Once an insurance company projects their costs to go above the premiums collected (less overhead and profit), they will increase their rates. Therefore, your rates are not determined by your loyalty to the company you are insured with, but instead by the profit margin the company is requiring itself to make.
I often hear that someone won’t change from their insurance company because they have been with them for so long that they feel a mutual loyalty to the insurance company and believe there is one to them as well. While that thought process feels good, it only lasts as long as you are a profitable piece of business on the company’s books. Excessive claims will require major rate adjustments and possibly dropping you from their list of insured.
Knowing that insurance companies are for profit businesses with shareholders who expect a return on their stock, one should assume that profits are thicker than loyalty. That said, how often should you shop? Typically, one can find savings every two to three years. Additionally, your life needs will change every two to three years and your insurance should be examined to be sure you are well protected. This amount of time usually brings significant changes to the market from at least one insurance company that can save you a substantial amount of money. Insurance companies also offer innovative ways to entice you to try their products which could give you coverage you didn’t realize was available.
So, every two to three years one should dig out the insurance policy, freshen up on the meaning of key words, such as “covered perils, deductibles, and exclusions” and shop their home and auto coverage. After doing this, you will sleep well for another two to three years.