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An Annual Insurance Checkup Can Save You
Money Without Hurting Your Coverage
As we go through life, our insurance needs change. It makes
sense to put certain dates on the calendar each year to see if
your home, auto, umbrella liability, life, health, business and
disability coverage not only fit your current needs at the right
cost but protect you and your family in case of a disaster.
It really hasn't been that long since Hurricane Katrina
underscored the need for individuals and families to think about
how insurance fits into an overall financial plan.
Weather-related disasters, however, should be only one part of
your assessment — it's wise to consider if you are adequately
insured in case a spouse or partner dies suddenly or becomes
disabled or if your business is damaged or destroyed.
Here are some ways to examine the coverage and cost issues
unique to your situation:
Homeowners' insurance: It's always good to see if you
can afford to take a higher deductible to get a lower premium,
but first, review whether you have the maximum home replacement
coverage on your house and its contents. Go to several agents to
see what you would get for maximum replacement coverage in your
community. This particular coverage is particularly important
since so many homeowners carry big mortgages and probably won't
have enough in savings to cover the difference of what insurance
won't. Also, be clear that "replacement cost" means
the amount that it will cost to replace your home on the land
where it stands — that usually means an amount considerably less
than the market value of your home.
Also, make an effort to inventory your collectibles, home
office equipment or additional furniture or assets you've
acquired since you last took an inventory of your home. Make a
list of those changes to review with your agent. Then take
photos of all significant items and keep them in a safe place —
possibly outside the home.
Auto insurance: If you're driving an older car that if
totaled wouldn't result in a financial burden to you, you might
want to drop collision coverage and/or boost the size of your
deductible. Take the money you save and put it in an account for
your next new car in case your car is totaled. Also, if you
consolidate your home and auto insurance at the same company,
you'll generally get a discount.
Health insurance: Do you fully understand all your
deductibles and co-pays? If you're getting ready to have kids,
emergency room visits happen. Does your current plan provide for
out-of-network care? Check your prescription coverage — see
what options your health coverage provides you for prescription
discounts and prescription-by-mail availability so you can have
uninterrupted access to important medications wherever you are.
Also, if you travel frequently for work or vacation, check to
see what your employer or individual health plan provides in the
way of coverage across state lines or outside the country. One
uncovered travel-related medical bill can leave you thousands of
dollars in debt.
Disability insurance: Many people get disability
coverage through work, but some advisors think you should have
separate coverage because group policies can be more restrictive
and therefore inadequate if you're out of work for a
considerable period of time.
Life insurance: Talk to a trusted advisor, such as a
CERTIFIED FINANCIAL PLANNER™ professional, about the right
coverage to protect your spouse and children with enough money
to help them continue their lifestyle and their educational
goals if you die. That includes money for ongoing expenses,
mortgage payment and tuition. Your spouse should also consider
similar coverage, particularly if he or she is working. You
might also consider life insurance for the children if only for
burial coverage.
Lastly, remember how external forces affect your ability to
buy insurance. For instance, if you buy in a high-crime area or
an area hard-hit by weather disasters, you'll find home and auto
insurance tougher to afford. Separate of all local factors,
though, you're going to have to keep a very close eye on your
credit report. Your ability to handle credit is pricing your
attractiveness as an insurance buyer, a homebuyer, even as a
prospective employee. If you really want to save money on
insurance, keep your credit record clean.
June 2007 — This column is produced by the Financial
Planning Association, the membership organization for the
financial planning community, and is provided by Don McCarty of
Financial Decision Partners, a local member of the FPA.
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