"A Penny Saved Is A Penny Earned"

Wednesday, September 16, 2009

9 Ways To Save Money On Insurance And Banking

9 Ways To Save Money On Insurance And Banking

1. Homeowner Insurance
You can save $100 or more a year by purchasing homeowner insurance from a low-price, licensed insurer. Ask your state insurance department for a publication showing typical prices charged by different licensed companies in your state. Then call at least four of the lowest priced insurers to learn what they would charge you. If such a publication is not available, it is even more important to call at least four insurers for price quotes.

Make certain you purchase enough coverage to replace the house and its contents.

Make certain your new policy is in effect before dropping your old one.

2. Life Insurance
If you want insurance protection only, buy a term life insurance policy.

If you want to buy a whole life, universal life, or other cash value policy, plan to hold it for at least 15 years. Cancelling these policies after only a few years can more than double your life insurance costs.

Check your public library for information about the financial soundness of insurance companies and the prices they charge.


3. Checking
You can save more than $100 a year in fees by selecting a Free checking account.

Banking institutions often will drop checking fees if paychecks are directly deposited by your employer. Direct deposit offers the additional advantages of convenience, security, and immediate access to your money.

4. Savings and Investment Products
Before opening a savings or investment account with a bank or other financial institution, find out whether the account is insured by the federal government. An increasing number of products offered by these institutions, including mutual stock funds and annuities, are not insured.

To earn the highest return on savings (annual percentage yield) with little or no risk, consider certificates of deposit (CDs) and treasury bills or notes.

Once you select a type of savings or investment product, compare rates offered by different institutions. These rates can vary and, over time, can significantly affect interest earnings.

5. Credit Cards
Don’t use them, get a debit card instead. You can reduce credit card fees, which may add up to more than $100 a year, by getting rid of all cards, and avoiding late payment and over-the-credit limit fees.

6. Auto Loans
Don’t get a loan, if you’ve followed the frugal living principles, you should have significant savings earning a low interest rate, pay for the car in cash. This could save you as much as several thousand dollars in finance charges.

7. Mortgage Loans
You may save tens of thousands of dollars in interest charges by shopping for the shortest-term mortgage you can afford. On a $100,000 fixed-rate loan at 8% annual percentage rate (APR), for example, you will pay $90,000 less in interest on a 15-year mortgage than on a 30-year mortgage.

You can save thousands of dollars in interest charges by shopping for the lowest-rate mortgage with the fewest points. On a 15-year, $100,000 fixed-rate mortgage, just lowering the APR from 8.5% to 8.0% can save you more than $5,000 in interest charges. On this mortgage, paying two points instead of three would save you an additional $1,000.

If your local newspaper does not periodically run mortgage rate surveys, call at least six lenders for information about their rates (APRs), points, and fees. Then ask an accountant to compute precisely how much each mortgage option will cost and its tax implications.

Be aware that the interest rate on most adjustable rate mortgage loans (ARMs) can vary a great deal over the lifetime of the mortgage. An increase of several percentage points might raise payments by hundreds of dollars per month.

8. Mortgage Refinancing
Consider refinancing your mortgage if you can get a rate that is at least one percentage point lower than your existing mortgage rate and plan to keep the new mortgage for several years or more. Find a mortgage calculator online and calculate precisely how much your new mortgage (including upfront fees) will cost and whether, in the long run, it will cost less than your current mortgage.

9. Home Equity Loans
Avoid home equity loans, they will cost you thousands of dollars a year and these loans reduce the equity that you have built up in your home. Also, if you are unable to make payments, you could lose your home.

A penny saved is a penny earned,

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