More than other age groups, people over 65 are reluctant to consider changes in their insurance needs. According to industry surveys, older consumers get locked into insurance policies for the long run, and are less likely to change them than younger consumers. Of course, with grown families and less likelihood of lifestyle changes, there may be fewer reasons for seniors to change the coverage terms of their policies.
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However, premiums for even the same coverage change, and so do the comparative rates charged by competing insurance companies. Insurers often have different financial reasons for their decisions on rates, and these may show up in major price variations for the identical coverage.
I shop around for new insurance policies once a year. This process is usually triggered by the renewal notices I get on my auto and homeowner's policies. I have found that I get lower rates by insuring my cars and home with the same company. To provide further protection, I get a supplemental personal liability policy that gives me extra coverage. It's commonly called an umbrella policy, and is inexpensive when linked with the underlying protection already provided by my auto and home policies.
Last year, for example, I saved hundreds of dollars on my home insurance by switching carriers. I thought I was set with my new company for several years but was surprised when I got notice of a big—as in more than 40 percent—prospective increase in home insurance for the coming year. So I went shopping again. And the company whose rates were nowhere near the cheapest last year now came out way ahead as having the lowest rates. Not only did I avoid paying more for homeowner's coverage, but I also will pay less next year for auto insurance.
Once you get used to shopping around, it becomes very easy to do. I scan copies of what are called the declarations pages of my policies, where the coverage levels are summarized. I either fax them or email them to agents with competing companies and ask them to provide quotes on comparable coverage from their firms. It doesn't take very long and shifting coverage is easy. I'm happy to save hundreds of dollars for a few hours' work.
Insurance is hardly a minor household expense, either. According to the 2009 survey of consumer household expenditures by the U.S. Labor Department, average after-tax income of households led by people ages 65 and older was $39,862, and they spent $37,562 during the year. Of this amount, health insurance spending averaged $3,027, car insurance cost $972, and $320 was spent on life insurance and other types of personal insurance.
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Home insurance was included in the $1,723 that the average older consumer spent on home maintenance, repairs, insurance, and other related expenses. If only a third of that was spent on insurance—about $570—the total average spending on insurance by older consumers would be nearly $4,900. That's 13 percent of total household spending just for insurance, and about equal to the typical older household's total annual spending on food—including food at home and at restaurants.
Beyond shopping around for better auto and home coverage, it's most important to take advantage of Medicare's annual open enrollment period. Health insurance is by far the largest insurance expense for older consumers. It's also a place where seniors have shown themselves to be particularly reluctant to switch insurers.
Medicare is complicated. So are the supplemental health and drug policies available under Medicare. Once seniors finally get into coverage plans that work for them, they tend to stay there. Studies show this to be an expensive decision. Just as with auto and home insurance, private Medicare insurers change rates and coverage terms frequently. Shopping for a better deal can save lots of money, not just in premiums but in out-of-pocket expenses for doctor's visits, procedures, and drugs.
Beyond lower rates, it's also important to review each year whether the amount and types of coverage you need have changed.
Many seniors have older vehicles and do not need expensive low-dollar deductibles for collision and comprehensive coverage. Consider selecting higher deductibles. However, do not scrimp on liability protection or uninsured motorist coverage. More people are dropping their car insurance because of the tough economy, so you need to make sure you're covered should you be in an accident with an uninsured driver.
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Insurers offer lower rates for low-mileage motorists. If you do less driving than in the past, you might qualify for a lower rate.
When you rent a car, odds are you do not need rental-car insurance and can rely on your existing car insurance policy to protect you. You will, however, be on the hook for the deductible payment should you be in an accident that is your fault.
Inflation protection is a must-keep feature of home insurance, but like millions of seniors who have downsized, you may have reduced your possessions. Review whether you still need special riders on jewelry, furs, computers, and other items.
Life insurance is designed to help loved ones, providing them money to replace the income lost by your death and helping to conserve assets in your estate should you have enough wealth to trigger estate taxes. As you age, the protective objectives of life insurance diminish and you may not need as large a policy.
Twitter: @PhilMoeller
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