29 Sep I want lower-cost auto and homeowners insurance. What to cut?

Q. I am looking to make changes to our auto and homeowners policy to try to lower costs. I know raising deductibles is one way, though it doesn’t help that much. My agent said lowering my liability coverage and the uninsured/underinsured injury coverage can cut premiums. What do the experts think?
— Owner

A. We’re so glad you asked rather than cut your coverage without thinking it all the way through.

If you make cuts, you will save a few bucks, but the question in whether it’s worth the risk.

That purpose of insuring anything is to protect from catastrophic losses, not small ones, said Jerry Lynch, a certified financial planner with JFL Total Wealth Management in Boonton.

He said generally, when a deductible on home or auto coverage is low, a few things happen.

“Your premiums are lower, you are more likely to file a claim as you hit your deductible,” he said. “If you filed claims, you are likely to get higher renewals, and potentially get dropped.”

He said you need to do the math.

“I like the highest deductible possible,” he said. “It lowers the premium and reduces the chances that I will file a claim, protecting my renewals and increases.”

Additionally, you have to weigh the costs versus the protections. He said he stopped the insurance on his wife’s wedding ring because it was “way too expensive.”

When possible, use the same company for all your coverages for discounts and to make sure there are no gaps that could cause finger-pointing, he said.

“For example, if some kids are playing in my driveway and someone runs into the car and gets hurt, I don’t want to fight with two different insurance companies saying the other is responsible,” he said.

You should shop for policies every few years to make sure the pricing on your policy is competitive and that there aren’t gaps you’re not aware of, he said.

“Most people don’t know what they are not covered for until they file a claim and it is denied,” he said.

Also you should insure catastrophic losses, generally with the use of an umbrella policy that gives you additional coverage on your auto and home, he said.

Then note that the minimum auto coverages in New Jersey is $25,000 in bodily injury liability per person, $50,000 in bodily injury liability per accident and $25,000 in property damage liability per accident, along with uninsured/underinsured motorist coverage equal to the minimum bodily injury liability.

“If someone is seriously hurt, you are not getting sued for $25,000. It will be in the hundreds of thousands of dollars, if not millions,” Lynch said, stressing that an umbrella policy is essential. “If you have assets, you need to protect them. Certain things you don’t want to skimp on.”

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This story was originally published on Sept. 29, 2023.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.