Many of you haven’t spoken with your insurance agent since you signed up for your auto or homeowners policy. Some of you may have spoken with your agent when you had to make a claim for a car wreck or maybe when a tree limb fell and did some minor damage to your home. You really should talk to your insurance agent more often! They are professionals that can help make sure that you have the proper coverage for all of your assets. So if you haven’t sat down with your insurance agent for an insurance review in a long time (or ever) – call you agent now and set an appointment. They will be happy to speak with you. BUT – don’t let your agent set the entire agenda. Make sure that – at a minimum – you ask your agent (and yourself) these six questions.
- Is my homeowner’s coverage adequate for the current market? Remember your home is not insured for the amount it will sell for. It is insured for the cost of rebuilding the structure – should a worst case scenario happen – like a fire or a tornado that completely destroys your home. Make sure your home has the proper coverage on the structure. With lumber and other building material costs skyrocketing, your house could be grossly underinsured if you haven’t reviewed your coverage recently. Your agent should have access to cost estimating software that will ensure you get the proper coverage.
- Are my liability limits high enough? This goes for both your home and automobiles. Remember, the purpose of insurance is to protect your assets and make sure you are okay in worst case scenarios. If you have a high net worth (or even if you don’t) you could be sued for a multitude of reasons that may or may not be your fault. This is where liability insurance comes in. When you have liability coverage, the payment comes from the insurance company – instead of your pocket! Regardless, make sure you have the proper liability insurance in place. As far as insurance goes, liability insurance is typically relatively inexpensive. For example, for many insurance companies increasing your liability from $300,000 to $1,000,000 will only cost you an extra $8 per year on a homeowner’s policy. That should be a no-brainer for most people. Even if you don’t think you have a lot of money, when your start adding your home, your automobiles, your retirement accounts, and all of your other assets together, the sum can be quite high. Maximize your liability limits for both your home and auto policies. That way you won’t be vulnerable to losing your entire net worth to one bad accident.
- Do I own enough life insurance (or any at all)? If you don’t, you almost certainly need some (even if you don’t currently hold a paying job). I will cover how much you need in a more detailed separate post, but your agent can give some guidelines on coverage. Most people should buy a combination of permanent (whole-life) and term life insurance. Make sure you properly cover your life. Ask yourself this question? If you were to pass away today, how would the people who depend on you be affected financially. If you have children, you probably need a lot more insurance than you think you do. If you have children, you should buy life insurance for them! It will never be less expensive to buy life insurance than it is right now.
- Do I have high dollar items (like jewelry or ATVs) that are not covered under standard homeowner’s policies? Many people thing that their wedding rings and other jewelry are covered under their homeowner’s policy – BUT most standard homeowner’s policies only cover up to $1500 for jewelry – AND most DON’T cover theft! So you should ask if you can get endorsements (or separate policies) for high-dollar jewelry items, ATVs, tractors, boats, and other expensive items that aren’t covered under a standard homeowner’s policy.
- Do I need any special endorsements for my homeowner’s policy? If you ever take the time to carefully read your homeowner’s policy, you will discover there a several things that are NOT covered under the policy – besides just the high dollar items like jewelry – mentioned above. Based on where you live, it may make sense for you to get an earthquake endorsement, an extra cost to rebuild endorsement, or a sewer/water backup endorsement among others. In addition, if you are eligible, you should definitely consider purchasing separate flood insurance, because – once again – floods are not covered by standard homeowner’s policies.
- Are my deductibles appropriate for my needs? Remember, your deductible is the amount of money YOU will pay every time you have an insurance claim. As a general rule, the higher your deductible, the lower the cost of your monthly premiums. So you want to make sure you hit the sweet spot where your assets are covered, you don’t have to pay too much for your monthly premium, AND if and when an accident occurs, you can afford to pay the amount that you have your deductible set to. If you have a decent amount of money sitting in a bank account, then it probably makes sense to raise your deductibles and lower your premiums; however, if you are strapped for cash, don’t save money on your monthly premiums by setting your deductible too high! It will come back to bite you when you file a claim. Your agent can help give you guidance here, but ultimately, it will be your decision.
There could be a lot of other things that you need to discuss with your agent. If you have a good agent, he or she should ask the right questions to help you uncover your specific insurance needs. But make sure that at a minimum, you discuss the above six categories of items. Often these discussions can lead to helping find other needs that will keep you and your assets better protected – and give you greater peace of mind. So go make the call to your insurance agent right now!