We Saved $2,250 a Year by Reviewing Our Insurance Coverage

Each month, NerdWallet suggests one wallet win to help you feel more confident about your money. For June, it's an insurance checkup.

Nearly half of Americans (49%) with auto insurance and 46% of those with homeowners insurance are stressed about the costs of their insurance premiums, according to a recent NerdWallet survey conducted by The Harris Poll in April.

Coincidentally, two Nerds (hello!) recently did our own insurance checkup. We learned some things, and we saved $2,250 in the process.

Here's how it went.

Why check your insurance rates?

Erin: I was actually writing about the aforementioned insurance survey, and as I was digging into NerdWallet's recommendations for adequate homeowners and auto coverage, I was like, wait, am I underinsured?

And then we had a near-miss tornado in my neighborhood. It was truly the "perfect storm" scenario — the combination of factors made reviewing my insurance coverage and identifying any gaps a priority.

Kate: On my end, we added a teen driver and a third car, and our insurance went up substantially. Also, our homeowners rate has been climbing, and we've just been too lazy to deal with it because we have bundled home, auto and umbrella policies. So getting that quote felt daunting.

Erin: It's pretty standard advice to shop around for insurance on an annual basis, but when it goes up a little bit at a time — say $15 a month or so — it's easier to just stick with what you have.

Kate: Inertia is a real thing.

Erin: It honestly didn't even occur to me that I might be overpaying. When I started the process, I was aiming to get more coverage, not a better rate. But I ended up paying less for way more coverage overall.

When should you check your coverage?

Erin: It's probably a good idea to review your coverage once a year, but there are definitely events that make it more of a priority. For example, if you bought a home more than five years ago, chances are rebuilding costs have gone up significantly.

Kate: Absolutely true in my area.

Erin: Right, so your dwelling coverage — or the amount of coverage you have to rebuild your home after a catastrophic event — may not be enough anymore.

Also, ideally your net worth is increasing year after year. It's smart to make sure you have enough liability coverage to protect your assets if something happens and you're at fault.

Kate: And then there are major life events: if you've had a baby, gotten married or divorced, or had a driver get a license, as was the case for us. A kid going to college can also change things.

And when your rates go up in general, that's a flag — it's just a good time to look around.

How did we shop?

Erin: I reached out to both NerdWallet Insurance Experts and a local insurance broker about homeowners, auto and umbrella insurance. NerdWallet Insurance Experts came back with a much lower rate than I was currently paying for homeowners insurance — even for higher coverage.

Kate: A win!

Erin: A win — but my existing auto insurance rate was lower than what they could offer me so I stuck with that and increased the liability coverage. It's worth noting my auto and homeowners insurance policies were bundled; I called my insurer to make sure my bundling discount wasn't significant enough to outweigh the savings from switching my homeowners policy. It wasn't — just about $72 in discounts a year, which I factored into my overall savings.

I also got umbrella insurance; I didn't have this coverage previously and now I have a $1 million policy.

Kate: Umbrella policies pick up where your home and auto policies end in terms of liability. So you have coverage in case you're sued, for instance.

Erin: Exactly. So I'm getting a lot more coverage across the board and saving $250 a year overall. That's not a huge amount, but it's 8% less than what I was paying, and I'm no longer worried about being underinsured. Like I said, I didn't go into this to save money. It was just a happy accident.

Kate: That's impressive! We tried a few approaches, including talking to NerdWallet Insurance Experts, some local insurance brokers and a few companies directly.

I've gotten quotes that save us more than $2,000 a year on our homeowners insurance. Unfortunately, adding a teen driver and third car upped our auto rates by almost $5,000 a year. And that quote has held up across companies.

Erin: Wow. OK, I knew it increased rates. I didn't realize it was quite that much.

Kate: I think it's probably worth mentioning that I'm in a very expensive part of the country.

What do you need to complete this process?

Kate: I was intimidated by how much information you need, which is why I was procrastinating. When was our roof last replaced? What's our house made from? What's the annual mileage on our cars? It helps to have copies of your current policies so you can make sure you're getting the same coverage.

Erin: For sure. I actually used ChatGPT to help me identify gaps in my coverage.

A couple of caveats: I'm moderately well-versed in insurance and I also had my existing policies as a benchmark. The former is important because I don't think you should take personal finance advice wholesale from AI tools — there's not enough nuance, and sometimes they're just flat-out wrong. But if you have a working understanding of the topic, you can question it and push back when needed.

Once I had numbers I felt comfortable with — which included an increase in dwelling coverage, as well as higher liability coverage on my home and cars — I sent them to the insurance brokers to get quotes and also a gut-check for my situation.

Kate: I also used ChatGPT, to narrow down which companies sell home, auto and umbrella policies, because not everyone sells an umbrella policy. It gave me a list, and then I told it I'm in New York and asked what companies people prefer here.

It helped me narrow my options to the companies that do the most business in my area. The best insurance company in Nebraska might not be the best option for me here in New York.

Would we have done anything differently?

Kate: I would have kept better notes because I was a little scattered. I was not as organized as I could have been.

Erin: I would've done it sooner!

Kate: I was also surprised by how long it took. Give yourself time for this task, because all the back and forth takes a little while, and sometimes with brokers it takes a few days.

Erin: Totally. It takes time, and it's not the most fun way to spend your time. Insurance is the least glamorous financial product I can think of. But I feel so much more secure having my coverage updated and ready to go. I hope I never have to use it, but I'm glad I have it. And saving money is just the cherry on top.

Kate: Bringing our homeowners insurance down does take a little bit of the sting out of how much our auto insurance went up for our new teen driver. We need to have all three drivers at our house take a defensive driving course so we can get that auto rate down a little. That will be our next task, I guess!

Tips for your own insurance checkup

If it's been a while since you evaluated your insurance coverage, now might be the time. To get started, set aside a few hours and gather your current insurance policy information.

Consider whether your needs have changed. Using your current insurance coverage as a baseline, think about how much auto insurance and homeowners insurance you actually need. Have you done home renovations that would increase the cost to rebuild your home? (Or have construction costs gone up in general?)

Ask your agent if there are ways to save. There may be discounts available for things like raising your deductible or taking a defensive driving course. For some, bundling multiple insurance policies with one insurer could also save money, but keep in mind it's not always the cheapest option.

Update your home inventory. Ideally, you have a list of your home's contents in case things are damaged or destroyed, but in a pinch, taking a video as you walk through your home can suffice. Zoom in on big items and their serial numbers, and make sure you get valuables that might be in drawers.

Make it fun! Consider insurance shopping with a friend, or reward yourself with your favorite pastry after reaching out to an independent insurance broker.

If you're following along with us on this monthly financial challenge, start by testing out the tips we shared today over the next few weeks. We'll be back again next month to focus on budgeting. And if you missed last month's edition, take a look back at how to save on summer spending.

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Erin El Issa writes for NerdWallet. Email: [email protected] Ashford, WMS™ writes for NerdWallet. Email: [email protected]. Twitter: @kateashford.

The article We Saved $2,250 a Year by Reviewing Our Insurance Coverage originally appeared on NerdWallet.