Is your insurance adequate for your 2014 life changes?
Mack and Teri Smith experienced sticker shock when their oldest child started driving. Their insurance premiums skyrocketed. While they knew that adding a teen driver to the account would cost them more, they didn’t realize how much more.
Adding a teen driver to your household isn’t the only life change you might experience this year. From remodeling your home to buying a car, life changes can impact your finances. Make sure your insurance policies match your 2014 life changes.
Teen drivers and auto insurance
According to a 2010 study by Insurance.com, adding a teen driver to a two-vehicle household can result in an annual premium increase of 58 percent. That means that if you are paying $1,848 a year for auto insurance, your premium cost will jump to $2,912.
The Smiths reduced their costs with a multi-policy discount and a “good student” discount, since their daughter was on the honor roll. If you know that your child will be driving in the coming year, plan now for the increased cost. You should set aside extra money for premiums and have an in-depth talk with your insurance agent about what to expect.
It’s also a great time to shop around. Prices can vary dramatically from company to company, so it’s a good idea to compare. For example, if the Smiths lived in California then they could save more than $3,000 a year by choosing Mercury Insurance ($2,860) instead of Farmers Insurance ($5,954)*. That’s a lot of cash!
Purchasing a new vehicle
Do you plan to purchase a new vehicle in 2014? Whether you buy or lease, your budget will be impacted. A car loan or lease often means a new monthly payment to worry about. When you borrow, interest costs add to the expense.
Another consideration is the insurance cost. When you have a loan or a lease, you are required to carry more coverage. If you carried nothing but liability on your old car, it can be a shock to add collision and comprehensive coverage to the mix. However, your lender or the leasing dealer will require it.
Prepare for the higher costs by saving up for these costs. Make room in your budget by cutting something else out, or contacting your insurance agent for information about multi-car or multi-policy discounts.
Home upgrades and insurance
Upgrading your home can be expensive. Very expensive. In many cases, you can cover these costs with the help of a low-cost home improvement loan, and by saving up to make the changes. When you’re done, you have a home you love a little more, which will also hopefully appreciate when you sell.
While upgrading your home, though, don’t forget to increase your home insurance coverage. “You should also meet with your local insurance agent each year to see how the renovations have impacted your insurance” says Douglas Menges, Mercury’s chief claims officer. “You may have added a gourmet kitchen with top-end appliances and granite countertops, which will be much more expensive to replace in the event of a loss. You’ll want to make sure you have enough insurance to cover that.”
It might cost a little more, but if a disaster strikes, you’ll be thankful for the coverage that allows you to rebuild your home completely.
A new year is an exciting time to consider what you can accomplish. However, don’t make the mistake of assuming your finances will remain the same even as the rest of your life changes. Protect your assets with the right insurance coverage in 2014.
Miranda is a freelance journalist covering financial topics. She writes for a number of financial blogs and web sites.
*Rate comparison criteria: Six month premium; married couple; 45/43; no accidents or citations; and a male teen driver, 16, with a good student discount; driving a 2012 Toyota Camry L and a 2013 Ford Edge with 12,000 annual miles each. Coverages: BI-PD 100/300/50; UMBI 100/300; $5,000 Med Pay; $500 comprehensive deductible; and $500 collision deductible. Quotes obtained February 2014 from Quadrant, an industry leading independent rating source. Rates do not reflect any changes that may have been made after these quotes were obtained. All rates reflect full payment of premium at time of purchase. Proof of qualification required for student discount.