Insurance. It’s a necessary expense that protects your assets, your health and your standard of living. There are many kinds of insurances out there, but the major players we are going to discuss are home, life, and auto insurance.

With the vast amounts of insurance options out there, one common denominator remains true; after initially purchasing insurance, many people will go on to automatically pay their premiums for years without evaluating their policies. It’s easy to get complacent about our insurance when we lead busy lives and have a lot of responsibilities. Automatic payments while convenient can hinder our realization that an assessment is needed. If you’re not performing an annual review of your insurance, you are making a decision that can cost you more money and leave you underinsured and unprotected when you need it most.

Over time, circumstances in your life change. Your policy may no longer have enough coverage to meet your basic coverage needs after upgrades, remodeling or accumulating more assets. If you have purchased high-value assets since opening your policy, they may need to have additional coverage. Situations in your life might have changed that will affect the way your current coverage will respond. These are all examples of why it’s important to perform an annual insurance review. It is essential to make sure you have the protection you need without spending more than you should. Some important questions you should ask yourself when reviewing your insurance coverage are.

Do I have accurate coverage? 

Making sure you have accurate coverage is important. You want to make sure you are getting the coverage you expect and be sure that the insurance coverage you purchased years ago still meets your needs today.

Many things can change your insurance needs. Property values, home improvements, income changes or new additions can all determine whether your insurance is providing accurate coverage. Perhaps 15 years ago your house would cost $150,000 to rebuild in the event of a loss but now it would cost $300,00 due to inflation and rising property values. That is a large gap in coverage.

Home renovations and upgrades that you have performed since purchasing your policy will also affect the coverage you need. A larger income, relocation or a new family addition may have changed your standard of living costs and future financial needs and in turn affect your life insurance coverage needs. The age of your car, how often you drive and your driving distance can change your auto insurance coverage needs and monthly premium.

Are my limits and deductibles still meeting my needs?

First it’s important to understand what a limit is. A limit is the highest dollar amount your insurance will pay you for a covered claim. If your loss is $180,000, but your policy limit is $125,000, then your insurance agency will only pay you $125,000. You will be responsible for paying the additional $55,000 to cover the remainder of the loss.

It may seem like a simple solution to buy a policy with an excessively high limit to ensure adequate coverage, but, unfortunately, higher limits mean a higher monthly premium. Over insuring yourself would mean paying more money for coverage that you may never use. Conversely, some people will buy an insurance policy with low limits to save money on their monthly premium. Under insuring yourself to save money, is not recommended because you may be left unable to replace the assets you are insuring in the first place. Reviewing your insurance coverage can help you keep the appropriate amount of coverage for the right price.

Now let’s discuss deductibles. A deductible is the dollar amount you pay out-of-pocket before your insurance covers the remaining expenses, sometimes this is on a per claim basis. If you have a $5000 claim and your deductible is $500, you will pay $500 and your insurance will pay the remaining $4500. A higher deductible means a lower monthly premium. An annual insurance review can help you maintain a balance between your deductible and premium amounts according to your financial situation.

Do I have any coverage gaps?

A coverage gap occurs when there is a difference (or gap) between the value of your asset(s) and your coverage of the asset(s). Two commonly used ways to avoid coverage gaps are through GAP insurance and insurance policy riders. Guaranteed Asset Protection (GAP) Coverage is an additional insurance that helps bridge the gap between what you owe on your asset and what your asset is worth. This type of insurance is usually used to protect new automobiles because of rapid depreciation.

Here is an example of how GAP insurance works. If your car is totaled, and you do not have GAP insurance, your auto insurance will simply pay the fair market value of your car. This scenario will possibly leave you still owing money on a car that does not exist. With GAP coverage, your insurance will pay both the value of your car and the remaining portion you owe your lender. Some common misconceptions about GAP insurance are that it makes payments in cases of financial hardship and covers car repairs and rentals, and in most cases this is not true. Most GAP insurance does not cover payments, repairs or rentals. Please talk to your insurance agent about the details of their offered GAP coverage.

An easy way to determine if GAP insurance is right for you is to meet the following criteria. If you did not put at least 20% down towards your car at purchase, or your loan is longer than four years, GAP insurance is likely a worthwhile investment for you.

Another common way people prevent coverage gaps is through the addition of an insurance rider. A rider is a provision in your insurance policy that is purchased separately from your basic policy. It provides additional benefits for an additional cost.

If you own expensive electronics, jewelry or family heirlooms adding a personal property rider to your policy will help protect them.

Many varieties of riders can be added to your policy, for example, there are riders that will cover the cost of a rental home, in case of the total loss of your home. There are also riders that cover losses from adverse weather conditions not covered by your basic policy, such as flooding or earthquakes. Performing your annual insurance review and talking to your agent can help you individualize your insurance coverage and protect you from coverage gaps. Are there any available savings or credits?

Your choices and lifestyle directly affect every type of insurance you own and how much that insurance will cost you. In many cases, you can make changes that will not only help you live a safer and happier life but will also save you money. Learning what some factors are that determine our premiums is the first step to lowering them. Let’s break it down.

Home Insurance:

Where you live is an important factor when talking about your home insurance premiums. Do you live in a high-crime area or in “tornado alley”? Expect to pay more. Conversely, if you live in a gated community or near a fire station (sometimes even a hydrant) you will pay less. The age of your house and construction type will also determine how much you pay. Newer homes have newer plumbing and wiring, so they are cheaper to insure. If you have a brick home or stone home, you will more than likely pay less than someone who owns a more flammable wood constructed home.

If you did purchase an old home, some strategic remodeling could help you save. A new impact resistant roof, updated wiring, and plumbing can all go a long way in lowering your homeowners policy premium. Contact your agent before doing renovations for advice on remodels that will help you maximize homeowners insurance savings. Insurance companies will also take into consideration additional risk factors such as swimming pools, trampolines, and sometimes even aggressive dog breeds. All of these things may raise your insurance premiums.

If you’re on a fixed income, you will be happy to know that you don’t need to perform costly remodels to save money. Simply installing smoke/carbon monoxide alarms, fire extinguishers and security systems can earn you credits on your insurance policy. New technology like water and natural gas sensors are also available and can mean big money savings. Contact your insurance agent to get a list of credits that can help you save on your homeowners policy.

Life Insurance:

Life insurance rates are largely based on your age, your health, your family health history, and lifestyle. Partaking in risky hobbies such as skydiving or driving a motorcycle will increase your rates over someone who doesn’t participate in those kinds of activities. People employed in a high-risk occupation such as construction or mining will pay more than a receptionist or a cashier.

Life insurance companies want to insure healthy people. Otherwise, they wouldn’t make money. That is why things like your family health history, maintaining an optimal weight and not smoking or drinking will lower your premium. Did you use to be a smoker but you quit? Let your insurance agent know and you may get a better rate.

Another incredibly important factor in how much you will pay for life insurance is your age. The younger you are when you purchase life insurance, the less you will pay. Life insurance before 40 is cheaper so don’t delay!

Auto Insurance:

The foremost factor in your car insurance premium is the make, model and age of your car. The car you drive will potentially cost or save you thousands of dollars. The price of insuring your car is based on risk, safety and cost to repair. Newer, high-end, larger and faster cars cost more to insure. A modest 4-door sedan will cost you less to insure than a sports car because it’s safer and will cost less to repair or replace.

Your driving history, age, and whether you are single or married will all affect your premium. If you have a history of auto insurance claims, your insurance company will assume you are a higher risk and charge you more. Younger drivers cost more to insure because they have less experience and married drivers often pay less because insurers assume they are less likely to partake in risky behavior.

The area you live will also affect your premium. Living in a densely populated area increases the likelihood of an accident compared to your country living counterpart. Where you live will also affect how much a claim is likely to cost. Repairs to your car will cost you more in New York than in Idaho. Living in an area that has inclement weather, such as snow and ice, will raise your premium as will an area that has a high-crime rate.

If you are a short distance driver, utilize public transportation, or bundle your trips to avoid driving, you may qualify for a low mileage car insurance discount. This discount offers a saving of up to 25% for those who drive less than a standard driver. To qualify for a low mileage discount, you must stay within your insurance companies provided mileage limit. Usually, a diagnostic or tracking device will be used on your car to ensure you stay within the usage limits.

Some additional questions to ask are:

Am I getting the best rate?

The two best things you can do to ensure you get the best insurance rates are to maintain your credit score and shop around. Differing from years past, today your credit score has a profound effect on your home and auto insurance. Although the process of using one’s credit score to determine rates is highly debated, it is now a hard reality of today’s economy. Once you have found an insurance company that gives you adequate coverage and a reasonable rate try to bundle your insurances with the same carrier to receive an additional discount. Bundling your home and auto insurance with the same company can save you anywhere from 5%-20%. If your savings is on the lower end of that range, you might find that you save more going with different agencies.

Is my contact information and beneficiary information up to date?

It is important to make sure your contact information and beneficiary information stay up to date. When you move or change your phone number, it’s imperative that you update that information with your insurance agency. Having a valid email address that you check regularly can help you easily stay in touch with your agent. In the event of death or divorce, it’s essential to verify your beneficiary designation and information is current.

So there you have it, the next time you get your insurance renewal statement in the mail, fight the urge to stash it away unopened and take the opportunity to prepare for your first annual insurance review! With so many things to consider, an annual insurance review can help guide you to money saving opportunities on your insurance premiums. It will also help you see where you can save money now and what changes you can make to save money in the future. It will also ensure you have all the protection you need. Remember to perform your annual insurance review at the same time every year so that it will become a habit.

How to Determine if You Need Life Insurance

Life insurance. Who needs it? Well, that’s a good question—one that we each ask ourselves at some point along life’s journey. In a nutshell, determining whether to buy life insurance or not depends on your own situation. If you don’t have people that depend on you (such as a wife and kids) and the income you bring home, then you probably don’t need life insurance. But if your salary is vital to supporting your loved ones, making the house payment, covering other bills and sending your kids to college, then life insurance can cover these financial commitments should you pass away

The unexpected death of a family member is devastating for survivors. All too often, the hardships are compounded by financial losses that could have been avoided with adequate life insurance.

Life insurance coverage payouts (known as death benefits) can help your family meet many important financial needs such as daily living expenses, mortgage payments, and college savings. What’s more, there is no federal income tax on life insurance benefits.

To figure out if you need life insurance, you need to think through the worst-case scenario.

• • If you died tomorrow, how would your loved ones get along financially?
  • Would they have the money to pay for your funeral costs, medical bills, taxes, debts, lawyers fees, etc.?
  • Would they be able to meet ongoing living expenses like the rent or mortgage, food, clothing, transportation costs, healthcare, etc?
  • What about long-range financial goals?
  • Without your contribution to the household, would your surviving spouse be able to save enough money to put the kids through college or retire comfortably?

  The Washington, D.C.-based Life and Health Insurance Foundation for Education has outlined the following scenarios to help you understand how life insurance might apply to your particular situation.

  • • You’re Married—Most families depend on two incomes to make ends meet. If you died suddenly, could your family maintain its standard of living on your spouse’s income alone?
    • You’re a Single Parent—As a single parent, you’re the caregiver, breadwinner, cook, chauffeur, and more. Yet nearly 40% of single parents have no life insurance whatsoever, and many who do have coverage say they need more.
    • You’re a Stay-At-Home Parent—Just because you don’t earn a salary doesn’t mean you don’t make a financial contribution to your family. Childcare, transportation, cleaning, cooking and other household activities are all important tasks, the replacement value of which is often severely underestimated. Some surveys have estimated the value of these services at over $40,000 per year. Could your spouse afford to pay someone for these services?
    • You’re Single and supporting others—Many single people don’t feel they need life insurance because no one depends on them financially. But there are significant reasons for carrying at least a small policy.

For instance, being responsible for paying for their own funeral and burial expenses is important to many people. Some single people provide financial support for aging parents or siblings. Others may be carrying significant debt that they wouldn’t want to pass on to family members who survive them.

If you’re in these types of situations, you should consider owning life insurance because you wouldn’t want your loved ones to be burdened financially in the event of your premature death.

Hopefully you now have a better understanding of whether or not you need life insurance. If the answer is yes, then the next step is to determine how much coverage makes sense.

Strange Insurance

Sometimes insurance goes beyond the simple home and car insurance of which we are familiar. These celebrities have taken the “tailored to fit your needs” aspect of insurance to the next level!

In 1957, the famous food critic Egon Ronay insured his taste buds for $400,000.

In the 1940’s Jimmy Durante insured his famous nose “The Schnozzola” for $50,000.

The NFL safety star Troy Polamalu insured his lustrous locks for $1 million dollars “The Boss” Bruce Springsteen insured his money-making voice for 6 million in the 1980’s. He was in good company because Bob Dylan at one time insured his vocal cords and Rod Stewart insured his throat!