Insurance is a funny thing. You buy it because you know how important it is to your financial security, but then, once you have it, you forget about it.
Yet, that’s a dangerous mistake to make.
Ideally every year, or no more than every two years, you should sit down and go through your policies and change them as needed. There are many important aspects you should consider:
Has Your Home Increased In Value?
We bought our home four years ago. We have replacement value homeowner’s insurance, which means we’ll be compensated for the amount an item costs to replace in full today. However, in the four years since we’ve lived here, our home has appreciated $31,000. In addition, we’ve added more to our home such as additional computers now that the kids are older and need their own devices.
It’s more than time that I update our insurance coverage to reflect the value of items inside our home and the home itself in case we ever need the insurance. Otherwise, I may find we’re short the money we need to replace our items.
Also, make sure to ask your insurance company if your insurance covers the cost not only of replacing your home should it be destroyed, but also the price of labor for the construction workers who will rebuild it.
Also, if you don’t re-visit your coverage on a regular basis you may find that your rates have gone up. Check rates regularly to save on your homeowner’s insurance.
Have Your Beneficiaries Changed?
Life happens, and who you have as your beneficiary may also need to change.
I read a few years ago about a man who died. He and his first wife had divorced nearly 8 years prior, and he had since remarried. Yet, he never changed his beneficiary on his various policies, so when he died, his ex-wife, not his current wife with whom he had young children, received all of his life insurance money.
You may have previously made each of your children a beneficiary, but then decide later to change that because one child helps you more or one child has always been financially independent while you’ve paid many expenses for another child and you want to give more to the financially independent child. Situations in life change, so every year, look at your beneficiary and decide if you need to alter it.
Has Your Health Improved?
If you bought life insurance when you had a health condition, such as you were overweight or obese or you were pre-diabetic or you had high blood pressure, for example, make sure you re-evaluate the policy if things change and your health improves.
If you lose weight and are now in a healthy weight range, you may be able to get your annual premium reduced.
The same applies if you have improved your health and are no longer pre-diabetic or if you have managed your high blood pressure. Over the course of a 20-year policy, reflecting these changes can save you hundreds of dollars.
Check Rates And Bundle
The insurance market changes from year to year, so take the time to call around and get quotes from a number of companies to see who can give you the best rate.
If you haven’t bundled your various insurance policies together with the same company, inquire about the discounts for doing so to see how much money you could save.
We bundle our two car policies and our home insurance, and the discount is good enough that I haven’t been able to find a better rate with other companies.
Finally, ask about other discounts. You may find that your teen driver can get a discount due to her good grades or that you can get a discount because you drive less than 10,000 miles a year. Companies change the discounts available, so it’s good to ask regularly.
Don’t make the mistake of buying insurance and forgetting about it.
If the unthinkable happens, you’ll be glad you took an active role in reviewing your insurance coverage so you don’t take a financial hit.
How often do you review your insurance? What other reasons would you add to this list?
Mike - Budget Kitty says
Insurance is definitely not something you want to set and forget. Life circumstances change and so do your insurance needs. Plus, shopping around can save you considerable money. We were able to cut our home insurance bill almost in half by switching carriers and bundling our policies.