Most Americans think the U.S. Economy is likely to experience a recession in 2022. A natural reaction to a recession is to reduce expenses. Insurance is an area where individuals may look to cut costs. Help recession-proof your risk management strategy, with these suggestions:
- Avoid common pitfalls that increase your insurance premium
- Maximize premium dollars spent
- Resist trimming coverage in critical areas (and why)
- Ideas for risk mitigation
- Basic risk tenants
Common Missteps That Impact Insurance Premium
Are you aware that when you call your insurance company to discuss a potential claim, it may raise your insurance premium? A CLUE report (Comprehensive Loss Underwriting Exchange) is like an insurance report card and is used by insurance underwriters to assess risk. One area the CLUE report tracks is potential claims.
The good news is that you have control over your own CLUE report. Choosing to work with an insurance agent places a buffer between you and your insurance company. Your agent is available to provide guidance for claims without impacting your CLUE report, which can save you premium.
Window chips and cracks: Any time the insurance company pays for chipped windows or broken glass, it may be listed as a claim and increase the cost of your auto insurance. Pay for these minor inconveniences out of pocket – it will save you money in the long run.
Getting towed or requesting a battery jump: When you have an insurance company tow your vehicle or provide a jump for your car’s battery, it may potentially be listed as a claim. These small claims impact our CLUE report and increate the cost of your auto insurance. It is less expensive to pay for a AAA membership that includes these services. Or, if they were included when you purchased the car, use the services provided by the dealership.
Maximize Dollars Spent on Insurance Premium
Umbrella/Excess Liability: Adding an excess liability or umbrella policy can save money while increasing coverage. An umbrella or excess liability policy may generate a credit on your home policy.
Credits, Credits, Credits: Home improvements may generate credits on the homeowners policy. Talk to your agent. Review and discuss any current or potential credits for which you might be eligible and that may create premium savings.
Where Not to Cut Back
Auto insurance: As tempting as it may be to reduce your auto liability limits or drop coverage, if there is an accident, it may cost you hundreds of thousands of dollars out of pocket. If you do not have a loan on the car, you may be able to drop physical damage coverage, but you should keep liability coverage. If you are in an accident, a lackluster economy may cause injured parties to seek larger rewards.
Uninsured/underinsured motorist coverage: If you are unfortunate enough to be involved in an accident with someone who has no or inadequate insurance, this coverage will make you whole. If someone cannot afford auto insurance, they likely will not have funds to cover repairs to your vehicle, medical bills and your lost wages. Therefore, it is important to keep this coverage as part of your risk management strategy.
Reducing coverage on your homeowners policy: A common misconception when reviewing a homeowners policy is that the dwelling value is too high. Remember, the dwelling value on your home is the price to rebuild the home today with like-kind and quality materials. The dwelling value is not the market value or tax appraisal value. Do not reduce the dwelling value on the home because you think it is too high. The premium savings is not worth it. Consult with a professional first. If the home gets destroyed, you will need to come out of pocket to rebuild if your dwelling limit is too low. Ask your agent if your policy has the Extended Replacement Cost endorsement.
Increasing your deductibles to amounts you cannot afford: As tempting as it is to raise deductibles to save money, it may cost you long-term. Remember, the deductible is the amount you need to pay out of pocket before the insurance policy responds. Make sure you can afford to pay the deductible before you change your policy.
Ideas to Mitigate Risks
- Install Leak Detection Devices.
- Install automatic water-shut off valves.
- Install security systems.
- Install first protective devices.
Basic Risk Tenants
- Don’t risk a lot for a little.
- Don’t use insurance as a substitute for risk control.
- An uninsured loss is a retained loss.
- Implement risk control techniques.
You can visit Associated Insurance Managers at 11111 Katy Freeway, Suite 120, in Houston. They are a full-service insurance agency providing personal and commercial insurance. To learn more about the services offered, email firstname.lastname@example.org, visit their website at https://www.aimins.net, or contact them at (713) 365-8400.
81% of U.S. adults are worried about a recession hitting this year, survey finds — April 5, 2022, Carmen Reinicke
Inflation Expenses Risk Sharply as Priorities: AP-NORC Poll — July 8, 2022, Associated Press