1. Successfully Reducing Insurance Costs
By Mel Feller, MPA, MHR
Mel Feller Seminars, Coaching For Success 360 Inc. /Mel Feller Coaching
Have you looked at your insurance costs lately? Chances are, your costs have gone up even if
your coverage has remained the same. Insurance inflation is a hidden danger because you do
not always pay those bills every month or pay them directly. In addition, when they do rise,
there seems to be no practical
way to control them. Let’s look
at some major insurance
categories to see where cost-
cutting might be possible.
LIFE INSURANCE
If you are the breadwinner of a family, you should not ignore life insurance. However, what
kind do you need, how much – and at what cost?
Whole Life is the most expensive because over the years this insurance accumulates cash value
as well as provides a guaranteed benefit, payable to your family, in the event of your death.
However, policy costs can vary considerably from one company to another – even for the same
coverage. Your occupation, where you live, your general health, and even your credit rating are
all part of the actuarial equation that determines your risks. However, different insurers apply
different cost factors to those risks. That is why it’s always a good idea to comparison shop
through an independent agent who can get competitive quotes from different insurance
companies.
Term Life limits coverage to a period in order to protect your dependents when they are most
vulnerable to income loss. For example, you may wish to protect your spouse and children up
to and through college age or during the years when you are paying off a mortgage.
Successfully Reducing Insurance Costs by Mel Feller

2. With term life, you can buy higher limits at much lower costs because there usually is no cash
value. At the end of the term, the policy lapses. This is one kind of insurance many companies
offer employees at little or no cost. You may be able to buy it without providing evidence of
good health. Look for term policies with a guaranteed renewal feature. In addition, check out a
new product, Return-of-Premium Term Life that gives you a refund of all premiums paid if you
outlive your initial rate guarantee period.
The best rates for life insurance are usually available to members of groups because insurance
companies offer discounts to groups. If you buy a policy when you are young, you will also save
on premium costs; however, you can expect premiums to rise when you enter into higher age
brackets or if you develop chronic health conditions. A disability waiver on your life insurance is
a good low-cost option. If you become disabled, the life premiums are waived.
DISABILITY INSURANCE
Some experts consider disability insurance more important than life insurance. Disability
insurance replaces some of your lost income if you are unable to work due to sickness or injury.
As The Motley Fool (www.fool.com) puts it, disability insurance protects one more member of
your family than life insurance – you.
While many employers provide long- and short-term disability coverage as a benefit, a private
disability policy is the best way for most workers to ensure adequate income, according to the
Insurance Information Institute.
A disability policy rarely pays more than 60% to 70% of your income, but when you pay the
premiums yourself, disability benefits are not taxed. You can trim the cost of disability
insurance by:
1.) Electing a longer waiting period before benefits begin (the “elimination period”) and
2.) Electing a shorter benefit period (benefits payable to age 65 instead of for a lifetime).
AUTO AND HOME

3. If your home is mortgaged or your car is financed, the lenders will require insurance coverage
that is sufficient to protect their loans if not you, your possessions, and third parties at risk. But
as home values increase, so do your insurance costs if you raise coverage to keep pace with
higher values.
If you paid less than 20 percent down payment when you bought your home, your lender may
have required you to buy Private Mortgage Insurance (PMI). PMI does not protect you or your
home; it protects the lender in case you default on the loan. If the equity you have accumulated
exceeds the 20 percent requirement, there may be no reason to continue paying PMI. Contact
your lender or mortgage servicer to learn whether you are paying PMI and how and when it can
be terminated or cancelled.
If you own your home and/or vehicles outright, you still have damage and replacement costs to
protect. The alternative to expensive excessive coverage is “self-insurance,” which means you
have the assets to cover first party losses due to theft or damage to your home or car.
Auto comprehensive and collision coverages generally max out at the book value of the vehicle
less the deductible you choose. The higher the deductible, the lower the premium. This is one
area where self-insurance can lower you bill. If your car is old with a low book value, you might
want to drop collision coverage altogether.
HOW TO CUT COSTS
Shop around for the best price. No matter what kinds of coverage you are buying, compare
quotes. (Make sure quotes are for the same coverage.) Give an independent agent some
guidelines as to how much you can afford to spend on insurance. Not every insurer will provide
prompt and complete service when you make a claim. Research the financial strength of
insurers with rating companies such as A.M. Best (www.ambest.com) and Standard & Poor’s
(www.standardandpoors.com).
Do not be over insured. Having more coverage than you need wastes money. If yours is a two-
income family, your life and disability coverage can be proportioned between both earners.
Term life may be the best choice for one of you. How frequently you make claims is more
critical to insurance costs than severity of claims. It may be better to pay small losses yourself
and save insurance for major losses.

4. Buy life, health, and disability insurance while you are young and in good health. Medical
conditions later on will increase your costs.
Lower coverage on older cars. It may not be cost effective to have collision coverage on a car
worth less than 10 times the cost of coverage. Base your calculation on what the value of such a
car if totaled.
Ask about low-mileage and safe-driver auto insurance discounts. Insurers like drivers who
carpool or take the bus to work and who have not had accidents or moving violations in a few
years. Other discounts may apply to older or retired drivers and teenagers who are good
students or are at least 100 miles away at college.
Check out multi-policy discounts. Many companies give a discount if you buy two or more types
of insurance from them. However, keep in mind that discounts alone don’t guarantee a lower
overall price. Do not hesitate to ask for deductions you may be entitled to.
If your employer offers insurance coverage, take it. Group plans, especially when employer-
subsidized, are usually a better deal.
Mel Feller, MPA, MHR, is a well-known real estate business consultant and speaker, specializing
in performance, productivity, and profits. Mel is the president of Mel Feller Seminars with
Coaching For Success, Inc. and Mel Feller Coaching, a real estate and business specific coaching
company. His three books for real estate professionals are systems on how to become an
exceptional sales performer. His four books in Business and Government Grants are ways to
leverage and increase your business Success in both time and money!