October challenge: Review your insurance coverage

Insurance is one of those rare things we buy that we hope we will never use. As a result, it is easy to kind of set it and forget it.

There are three reasons you need to review your insurance at least one a year.

1. Your coverage needs may have changed. We buy the insurance but then fail to follow up periodically to make sure that the coverage we have is still appropriate.  The sad result is when the day comes we need to make a claim, we may be surprised to find that we are not covered nearly as well as we thought.

2. There may be cheaper options. It never hurts to shop your insurance around a bit. If you haven’t reviewed your insurance recently, you might find a few simple adjustments could save you big bucks over the course of a year.

3. Major life changes affect your insurance. Have you gotten married or divorced? Had a child? Experienced a significant change in income?  Made major renovations to your home? These kinds of life events can affect your insurance needs.

My October challenge for you, if you have not reviewed your coverage within the last year, is to schedule an appointment this month with your agent.

Life insurance

You should have at least 10-12 times your income in life insurance. The real purpose of life insurance is to replace your income in the event something were to happen to you. Would those who depend on your income be in financial trouble if you were no longer here? Then you need to have life insurance. If your income has changed significantly since the last time you reviewed your life insurance, you might need to adjust the amount of insurance you have.

A second very important thing you need to review is your beneficiaries. If you have changed marital status, had children, or had other significant life events, it is possible you may need to change your beneficiaries.

A third consideration is health changes. Have you lost a considerable amount of weight since you first qualified for your life insurance? Stopped smoking? Made other positive improvements to your health? It is possible you might qualify for a lower rate.

Homeowners or renters insurance

Have property values in your area changed significantly since the last time you reviewed your policy? Most insurance companies no longer offer full replacement coverage policies. Generally, they insure what they calculate to be the current replacement value with some increases for inflation over time. But if your home has significantly changed in value, you might not have the coverage you think. The last thing you want to happen is for your home to burn down and find out that the policy you bought 10 years ago only provides $100,000 in coverage but it is now going to cost $200,000 to rebuild your home.

Have you made significant upgrades to your home that would affect the value of the property? If so your covered amount may no longer be accurate.

If you are a renter, you must have renters insurance to cover your personal property. Your landlord’s policy does not cover your personal belongings. If you do not have renters insurance, you need to buy it today! If you do, you should review your policy and make sure your belongings are properly covered, especially if you have made any significant purchases.

Auto insurance

It is not a bad idea to periodically shop your auto insurance to make sure you are getting the best rates. Even if you choose to stay with your current company, there may be many ways you could save money. Good student discounts, changes in your credit score, changes in your driving patterns, multiple vehicle or multiple policy discounts, or safe driver discounts are just some of the ways you might be able to save.

If you have a good emergency fund, consider raising your deductible. This can be a great way of saving on insurance costs, but only if you have the money saved to cover the cost of the deductible.

If you drive an older car, check to see what it would save to drop collision. I do not necessarily recommend doing this. Often collision coverage is very affordable on older cars, but it is something to at least look at. Never, ever, ever try to save by reducing your liability coverage. That can be a quick ticket to bankruptcy court in the event you are in a serious accident.

Health insurance

October is often the month for benefit re-enrollment for those who have employer sponsored healthcare plans. Or for those who get their insurance through the Affordable Care Act it is likely coming up on the time when you will need to enroll for another year. Many programs will automatically re-enroll you for your current coverage. This might be your best approach, but take a few moments to look at your options. Make sure that your healthcare coverage is most appropriate for your situation.

If you are fairly healthy, a high deductible plan combined with a health savings account might save you a considerable amount of money. Like auto insurance though it is ok to look at ways to save by increasing your deductible, but you should never lower your maximum out of pocket expenses.

Umbrella policy

Finally, if you are doing well and are starting to acquire significant assets, you might consider adding an umbrella policy to your accounts. An umbrella policy works in conjunction with your homeowners and auto insurance to provide you with additional liability protection in the event you were to be sued. If you do not have many assets, then the standard liability protections your basic policy provide is sufficient, but once you start to accumulate more assets an umbrella policy can be fairly inexpensive and provide you with a great deal more protection. The last thing you want is to have a serious car accident or have a visitor fall at your home and suddenly you are at risk of losing a lifetime’s work of saving.

Take the time to schedule a meeting with your insurance agent

Insurance is an important part of a healthy financial plan because it protects you from disasters that could sink you financially. It is always sad to hear of someone who lost everything they had because they weren’t insured. Even sadder are the stories of those who thought they were covered, but found out too late they did not have the coverage they thought they had. Take the time this month to schedule an appointment with your insurance agent just to make sure you have the coverage you need.

Please note: I reserve the right to delete comments that are offensive or off-topic.