Stepping into retirement is often as exciting as it is nerve-wracking. You've finally reached your golden years, and all the hard work you put into your career has started to pay off. But while leaving the workforce may provide more free time for travel, grandkids and the pursuit of your passions, it also means that you'll need to pay close attention to your finances in a post-paycheck situation.
Most retirees look to their pensions, Social Security income and other retirement savings to support them through their nonworking years. However, the lack of a full salary can bring psychological pressure that wasn't an issue when you were earning a wage. To deal with this pressure, those entering retirement should consider simple ways to reduce monthly financial obligations such as insurance premiums.
Here are six ways retirees can save on their home and auto insurance.
1. Tell your homeowners insurance company that you've retired
If you've reached retirement age, you may also be approaching your final few mortgage payments. Once you've paid off your mortgage, you won't have a bank or lender requiring you to carry homeowners insurance. However, it's better to ask your insurer for a retiree discount rather than cancel your policy completely.
The coverage that homeowners insurance provides is crucial. If you cancel your policy after paying off the mortgage only to suffer a fire, flood or liability lawsuit, the damages could diminish or wipe out your savings.
Most home insurance companies provide discounts for retirees based on the idea that retirees spend more time at home, which reduces the risk of unattended disasters and burglary. In addition, most insurance companies offer rental insurance discounts to retirees who rent their homes.
2. Tell your auto insurance company you'll no longer commute
Drivers in their 50s and 60s already enjoy lower average auto insurance rates than any other age group. However, many retirees miss out on significant insurance discounts simply because they don't ask for them. One of the easiest ways to save on your auto insurance policy is to inform your insurer that you'll no longer be driving to work every day.
The more you drive, the more likely you are to get into an accident. A significant portion of your car insurance premium is based on the number of miles you drive in a year, as well as the reason for that travel. Insurers see daily commuting as a bigger risk factor than leisure driving because it typically occurs more frequently and during periods of heavier traffic.
If you've recently retired and no longer have a daily commute, contact your auto insurance agent and ask them if you qualify for a low-mileage discount. When it comes time to renew your policy, make sure your insurance company is basing your rates on your current driving expectations, not the information you gave them when you were still working.
3. Take a defensive driving course
Along with AARP, most major insurance companies offer defensive driver courses designed specifically for older drivers. The age limit to participate in these affordable courses varies by state. If you're at least 50 years old and you complete a defensive driving course, you may receive a discount of around 10% off your insurance premiums.
4. Take advantage of discounts for using telemetric technology
Some insurers offer new technology to help you control those costs. Telemetric devices, which track your car's speed, braking and other driving behavior, allow insurers to offer discounts for customers who demonstrate safer habits on the road. While privacy may be a concern, the potential savings may be worthwhile for retirees worried about their premiums going up as they age.
- UBI technology: Usage based insurance technology includes devices that you install in your vehicle to monitor your driving habits. With UBI tech installed, your insurance company can tell if you're a safe driver or if you frequently accelerate and slam on the brakes. UBI tech could help you earn lower rates—if you're a good driver. If you're not as confident in your driving skills, UBI might not be right for you.
- Location-tracking devices: If your vehicle doesn't have a built-in location device, you might not be able to track it if it were stolen. Because of this, insurance companies often offer policy discounts when you install security devices in your car.
5. Consider higher deductibles
Most insurance policies offer a basic tradeoff between the deductible and the premium: higher deductibles mean less coverage and lower premiums, while lower deductibles mean better protection but higher monthly charges. The deductible is the out-of-pocket maximum that an insured customer must pay before insurance kicks in.
The amount of your insurance deductible is up to you to decide, based on your priorities. If you're retired and want to reduce your monthly premium, picking a higher deductible will help. However, keep in mind that a higher deductible means taking more risk onto your own shoulders.
6. Compare quotes
If you've been with your insurance company for several years, you may be receiving a loyalty discount. You could also be receiving a discount if you've bundled multiple policies under the same insurer. These are both strong incentives to stay with your current insurance company.
However, the insurance industry is highly competitive, and many insurers are willing to offer reduced rates in order to win your business. If you're unsatisfied with your current rates, compare quotes from a few of the best insurance companies in your area to see if you could get a better deal elsewhere. Even if you don't switch, your current insurance company may offer you a discount just to retain your business.