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Keeping Your Insurance After Losing Your Job

You got laid off and now you’ve got to figure out how to cut your expenses. Insurance is a place to start (big price tag, right?). Not so fast.

There are smart ways to reduce your insurance costs, but eliminating insurance altogether can lead to much bigger financial problems. The purpose of insurance is to protect you from catastrophic financial events—the operation that puts you in the hospital, the major auto repairs, the house fire.

So what can you do to reduce insurance costs but still be protected?

Health insurance
Losing your job usually means losing your health insurance coverage. Rules covering employers with more than twenty employees, called COBRA, may let you keep that coverage for eighteen months. But the rate you will have to pay for continuing your coverage is the amount you were paying before through payroll deductions, plus the portion your employer paid on your behalf. That total amount can be pretty expensive. If you have major health conditions, it may be the best you can do. But, if you are healthy and young you have choices. Start shopping and compare what’s available through an individual policy.

There are short-term (usually six month) plans that provide for catastrophic coverage. There is a high deductible—the amount you would have to yourself before the insurer pays on a claim - but it provides coverage if you end up with a serious medical problem. You should also explore health savings accounts (HSAs) as a cost-effective alternative. Check out alternatives at eHealth. Remember, at this point you might only be able to afford catastrophic coverage, but if you end up in the hospital, you will be glad you have it. Bills leading to bankruptcy can ruin your financial life for years.

Auto insurance
This can be a pretty tempting bill to drop ... after all, you aren’t driving to work anymore, just around home, right? Wrong. One survey found that more than 77 percent of accidents occur within 15 miles of home. And, in most states it is illegal to drive without insurance. So what can you do to cut your costs? First, call your insurer and tell them you need to cut the cost of your policy and ask them for recommendations. The first thing to evaluate is the deductible; increasing the deductible will lower the overall price of your policy. Also, consider dropping collision and/or comprehensive insurance if you have an older car. Next, look at how far you are driving. If your number of miles has dropped significantly, ask your insurer about a low-mileage discount. (Some insurers are now testing programs that use a tracking device in your car to see your mileage usage.) Verified low mileage leads to lower premiums. Plus, it might be a good time to shop your policy and see if you can get a lower rate from another insurer.

Home insurance
When you’ve got a mortgage, you have to have home insurance. But you might be able to increase the deductible and reduce your premium. Call your insurer and ask about credits if you have a home protection system or a loyalty credit. Rates are usually lower if you insure your home and car through the same insurer.

Dental insurance
If you had it at work, you probably found it was pretty inexpensive. Not so when you try to buy it yourself. Look at dental discount plans. For a small annual fee, you get a reduced rate from your dentist. Just make sure your dentist accepts the plan. Dental health is important as studies continue to show that a healthy mouth reduces the chance of developing major health conditions. Take a look at DentalPlans.

Life insurance
If you had group life insurance through your employer, now is a good time to look at alternatives. Group life insurance is almost always more expensive than an individual term life policy. If you are young and healthy, the cost for term insurance can be very low. Compare rates at a site like iQuote or Insurance.

By Laura Weber Rossman of BettyConfidential