While creating your to-do list, add another task—sprucing up your insurance. Assessing and revamping your insurance at least once a year can save you money on premiums and safeguard your family and property.
Let’s get into the when and why sprucing up your insurance policies should be a priority on your list.
I | How often should I review my insurance policies?
Life happens, and things change. We don’t remain the same year after year. Insurance policies do, and that’s the problem.
Reviewing your insurance policies every six to twelve months may reveal room for adjustments. Ensuring your coverages remain fluid with your lifestyle provides the best protection possible.
II | Why should I review my insurance policies?
When purchasing insurance coverage, one of your defining factors is your present circumstances. Significant life changes arise after the policy is enacted, so you’ll need to make adjustments.
The level of coverage offered by your policy should always be in line with your financial obligations.
Here are some situations that may prompt updating your policies.
Life Insurance
Change in marital status
Were you single at the time you purchased the policy? Are you married now? Are you newly single after a divorce? Either of these cases will require a change in beneficiary information, whether you want to drop your ex or add your spouse to the policy.
You may also want to change your purchased policy type for more comprehensive coverage and flexibility.
A new addition to the family
Becoming and new parent is a huge responsibility. It brings with it concerns about your child’s present and future wellbeing. Modifying your life insurance coverage is one step in securing your child’s financial future.
Typical uses of life insurance benefits include:
- Paying for your funeral, cremation, or any medical bills you may have incurred;
- Paying off debts like credit card bills, mortgages, and other outstanding loans;
- College tuition.
Health matters
Insurers require the disclosure of your medical records and history when you apply. Two of the main ‘risk factors’ they consider are if you’re a smoker or obese, which increases the likelihood of developing critical medical complications.
To mitigate any possible early losses, insurers will assign high premiums. These premiums, however, are not permanent. You can adjust them if you want to make the required lifestyle changes.
These adjustments include quitting smoking and losing weight.
Once these risk factors are no longer a problem, you can apply for an adjustment. Approval rests on the result of your new medical.
Home Insurance
Fancy New Gadgets
As a new homeowner, you may have started with the basics when furnishing your home. Over time, however, your ‘stuff’ accumulates as you buy or receive new appliances and electronics.
Expensive additions increase the value of your home.
If it’s been a few years since you last reviewed your home insurance, your accumulated assets probably outvalue the coverage for replacing your personal property.
Remember the inventory list you wrote when you first applied for your insurance? I hope you do. And I hope you stored it away in a safe place along with your other insurance documents. It’s time to update or create a new list.
Prepare a digital copy (if you haven’t already), so it’ll be easier to keep track of things and make changes. Make a note beside the items you no longer own, but don’t change the prices. Add your new assets along with their value.
Your inventory list will help you assess if your current coverage offers adequate protection. A ready and up-to-date list will expedite the claims process and verify your losses for reimbursement.
Refurbishing and Renovations
Refurbishings and expansions act in the same way as your new gadgets; they add value to your home. The added value affects the cost of repairing or rebuilding your home.
Outdated policies leave you unprotected from potential dangers and financial losses. Discuss with your insurance agent if your coverage offers adequate protection, factoring in all the new changes you’ve made.
Security Upgrades
Installing or upgrading your home security system could qualify you for discounts. The safer your home, the less risk you face of a break-in. Lower risk, in most cases, equals cheaper premiums.
Car Insurance
Changes In Your Driving History
Auto insurance companies review your driving history as part of your insurance approval process. A single traffic violation (parking ticket, speeding ticket, or a failure to stop) and previous crashes can raise your premium.
Traffic tickets and moving violations do, however, expire. Check when they do, and shop for new rates as soon as they pass.
New ZIP Code
Where you live affects your premium. Insurance companies reference data gathered about high-risk locations when determining their premium rates. Moving to a new ZIP code could increase or decrease your premium even in the same city.
Moving to a “safer” ZIP code with a low rate of vehicle-related incidents could see your premiums trending down.
Change In Marital Status
Yes, getting married could also help you lower your auto insurance premiums. Depending on the state and insurance company, married couples pay 4-10% less than singles. If you got married in Georgia recently, you could get a 9.29% discount on your car insurance.
This preferential treatment comes from various studies that have noted married people tend to have fewer accidents.
The Kids Have All Grown Up
Adding a teenager to your car insurance adds an immediate increase. Their lack of experience puts them at greater risk of meeting in a traffic accident, and insurers consider this.
Once your kids get older, moving out of their teenage years and early twenties, review their policy. Additionally, student and alumni discounts may apply if your child has a degree and performs well in their studies.
Changes to State Insurance Laws and Requirements
The legal requirements for personal injury protection, liability, and other insurance coverage options change with states implementing new legislation.
These changes can lead to more or less liability coverage to comply with the law. Check your state’s insurance department for current rates and adjust your policy as necessary.
Auto Depreciation
As your car ages, it loses value. Reviewing your auto insurance every six to twelve months ensures your policy reflects your vehicle’s current decreasing worth.
Business Insurance
Business Growth or Slowdown
As your business grows, you take on new and increased risks. Adjusting your business insurance whenever you hit significant growth milestones like hiring new employees, or expanding into new markets, ensures you’re always protected.
Likewise, if you’ve scaled down your business, you may not need as much coverage anymore.
Evaluate your business and compare the results with your current coverage. How far off is your insurance policy in meeting the changing needs of your business? What more do you need, or what can you trim?
Don’t be afraid to seek professional advice. Ask your insurance agent to help you decide if your coverage is right for your business today.
Other Factors
Improved Credit Score
Your credit score factors into all of your insurance policies and most loan-related transactions. Where you fall on the table ranging from very poor to excellent demonstrates your financial trustworthiness to an insurer.
If you applied for your insurance with a score of 580-669 (fair) but have since boosted it to 740-799 (very good), shop around for cheaper rates.
In states like California, Hawaii, and Massachusetts, fret not about your credit history affecting your insurance. Insurers are not legally allowed to use your credit history in their approval process in these states.
Is it time to consolidate?
Insurance carriers offer multi-policy discounts on their bundled plans. You may want to consolidate if you have multiple insurance policies scattered over several companies. Or at least whittle down the list. A shorter list is easier to monitor and could translate into discounts.
III | What to Consider When Reviewing Your Insurance Policies
There are two general considerations when reviewing your insurance policies.
1. Your debts
Our debt fluctuates as we live, build businesses, and grow our families. We take on mortgages, car loans, student loans, business loans, you name it. Whether or not you’ll pay them all off before your passing is a mystery. And they don’t disappear after you die.
Co-signers, joint owners, spouses (in community property states if the debt doesn’t predate the marriage), and the administrator or executor of your estate will inherit your debt.
Inheritable debts include:
- Credit card debt;
- Mortgage and home equity loans;
- Car loans;
- And student loans.
Adjusting your life insurance, for example, can help cushion the financial blow of your passing.
2. Financial Responsibilities
Along with debt repayments, you have regular financial responsibilities. Be them for your elderly parents, spouse, or offspring. And in some cases, business partners. How far will your insurance go in covering the bills you currently pay?
Conclusion
Your insurance policies aren’t one-off paperwork you never look at until something terrible happens. The same protections you had when you first signed will change yearly.
Stay on top of all your policies, making adjustments every six to twelve months.
For life insurance: Adapt your life insurance to reflect your lifestyle and financial liabilities, whether you are getting married, divorced, or welcoming a new addition to your family.
For home insurance: Update your inventory list and calculate how much your home will cost to repair or rebuild at the current market price.
For car insurance: Ensure your insurance policy reflects your current driving record, the depreciated value of your vehicle, and updated legislation.
For business insurance: Adjust your business insurance to match the growth or decline of your business.
Insurance policies don’t automatically adjust to fit the ever-changing contours of your life. Consult your insurance agent when working through your sprucing up, and make this a priority task to cross off your list.
