As January approaches, you may be thinking about New Years resolutions, usually centered on how to improve your life and the lives of those closest to you by making changes.
When was the last time you thought about how well you are protected against an unfortunate turn of events? Insurance, even if you believe you have good coverage right now, is not a one-time, buy-it-and-forget-it product.
The new year is the ideal time for an insurance checkup. Life events may change your insurance needs. Its better to invest just a little time right now to review your coverage than to come up short when you face a critical need for coverage.
Reviewing insurance policies probably doesnt sound like a fun activity, but you have many solid reasons for settling in for a couple of hours of work. Consider the following:
- You may save money. If you purchased a policy several or many years ago, you may find a better deal if you shop around. Insurance is a highly competitive industry. New options are always available and rates may have changed. Its not difficult to switch coverage if you find a better policy elsewhere.
- You may be able to simplify coverage. If you have life, homeowners and auto insurance with different companies, you may be eligible for a much better deal if you consolidate your coverage with one company. Insurance carriers often offer discounts for bundling policies.
- You may qualify for discounts. You may find that youre eligible for price breaks if you take simple and affordable steps like installing burglar or fire alarms, a water leak detection system or battery backups for sump pumps and automatic standby generators in case of a power failure.
- You may find redundancy. You probably have many types of insurance policies – life, auto, home, health or supplemental insurance that covers a specific contingency. You may be spending money on policies you dont need because youre covered elsewhere or your circumstances have changed.
So are you ready to resolve to do a little insurance homework? Use this checklist to decide where you have solid protection and where you need to make changes:
This key type of insurance covers your loved ones who are dependent on you for financial support. Such a policy can also help cover estate taxes, outstanding debts and funeral costs. You may need to change your life insurance coverage for the following circumstances:
- If youre earning much more than when you initially purchased your policy, you want to boost your coverage to adequately protect your familys financial needs.
- If you retired and have a comfortable cash flow, your family may need less replacement income that life insurance provides. Before you make changes, be sure to also review any pensions youre receiving and their requirements, as such income streams may not continue for your family.
- If you got married in the past year or added a child to your family, you need additional coverage. You may be able to reduce coverage if your children are now grown and living independently.
- If your spouse started working recently, you may need to add life insurance in order to protect that additional source of family income.
- If youve paid off your mortgage or another outstanding debt, your reduced financial obligations may change your insurance needs.
If you have a mortgage, you purchased homeowners insurance, as the law requires it. Your home is most likely your biggest financial investment, so its critical to review your policy. Make sure you can cover the replacement value of your home and its contents in case of a disaster. Consider the following factors:
- Replacement value of your home and possessions. If you bought your home many years ago, think about how your life has changed since. You may have added antiques, art, jewelry, electronics, sports equipment or valuable collectibles to your home. Your insurance needs to cover the cost of replacing your home and its contents. Check with your mortgage lender about the replacement value of your home. Then inventory your home contents and their value in order to assess your coverage. If you have an expensive collection that has grown over the years, work with a licensed appraiser to get a statement of their value. Add together the replacement values of your home and contents to see if your insurance is adequate.
- Your deductible. This is the amount youre comfortable in paying out of pocket in case you need to file a claim. If you can manage a higher deductible, you may be able to save money on your homeowner policy.
- Flood insurance. If you live in a high-risk zone, be sure youre adequately covered for water damage or destruction of your home and contents. Consider the hurricanes in recent years that devastated widespread areas far from the ocean due to torrential rains. Even if your home is not in a high-risk zone flood, it may be vulnerable to such a natural disaster.
- Earthquake insurance. Standard homeowner policies dont cover earthquake damage. Coverage is expensive and has a high deductible, but if you live in an earthquake-prone area, balance the cost of coverage against the potential loss of everything you own.
Chances are good you change cars more often than you move your household, so your auto insurance may be up to date. Still, consider the following as part of your New Year insurance checkup:
- If the number of miles you drive in a year has changed significantly, you may need to adjust your coverage.
- You may be able to save money if you bundle your homeowner and auto policies.
- Your rates may be different if you are in a different ZIP code.
- If an adult driver has moved away, your rate will change.
- If your paid-off car is no longer valuable enough to repair, you can consider dropping your collision damage coverage. Check your car value at Kelley Blue Book.
- State laws for liability for bodily injuries to others if youre responsible for a collision vary, so be sure youre adequately covered where you live. If youve moved to a new state recently, this is doubly important.
If you get a satisfied feeling from being in control of your finances, an insurance annual checkup is for you. But even if you find the process tedious, managing important insurance coverage will give you peace of mind and erase doubts. And you may even save money!
Its easy to get started. A SelectQuote licensed agent is available to help you with your options for life, homeowners and auto insurance so you can start the new year completely covered.