Why Insurance Costs are Excessive (& Methods to Reduce Them)

Most of us pay too much for insurance.

I’m not talking about how we purchase insurance policies or which providers we buy from, nor their impact on premiums; rather, I am speaking about the level of coverage we purchase.

Over our lives, we give too much money to insurance companies; over-insuring bolsters their profits at our expense.

Insurance requirements and costs, in many ways, serve as a progressive tax on those most in need. Remember: lower claim deductibles = higher premiums while higher claim deductibles = lower premiums. Think:

If you own a vehicle and lack savings to cover an accident, chances are good that a lower deductible and more costly collision coverage are necessary – both will significantly raise premiums.
If you own a home and lack savings to cover an extensive deductible, in the event of its destruction you will require a smaller deductible – leading to increased premiums and premium payments.
If you have a family and limited savings to cover the income loss from a deceased spouse’s passing, purchasing more life insurance will increase premiums significantly.
If your health is poor (and lower wealth equals poorer health, on average), then lower deductible plans will more than likely become necessary, which in turn leads to significantly increased premiums. Simply put: the less money there is available for insurance payments, the more likely you are to need coverage.