If you're like most people, insurance policies are not something you think about on a regular basis. Once you sign up for coverage, it's easy to file away those documents and not look at them again until renewal time. But is this a smart approach?
There are many good reasons to review your insurance regularly—as often as once a year for some policies. Failing to do so could end up costing you money or leave you without the protection you need. Read on to find out why a periodic insurance review is so important.
Major Life Events Call for an Insurance Review
One of the biggest triggers for reviewing your insurance is when something major changes in your life. Getting married, having a baby, buying a home, or retiring can all impact the type and amount of coverage you need. The last thing you want is to be caught off guard by being underinsured or having gaps during important life transitions.
How Marriage Affects Your Insurance Needs
Tying the knot is an exciting milestone, but it also makes your insurance needs more complex. Combining finances with your spouse means you may need to adjust the beneficiaries on your policies or consolidate coverage. For example, you may be able to save money by bundling your car insurance. If your new spouse already has health insurance, you will need to notify your provider to avoid double coverage. A review of your life insurance needs is also essential after getting married to ensure your shared assets and future earnings are protected.
New Babies Call For More Life Insurance
The arrival of a new child is a joyous occasion, but it also creates an additional financial responsibility. Ensuring your family is provided for if something happens to you becomes even more important after having kids. Most experts recommend securing enough life insurance to cover 10-12 times your annual income once you have children. Reviewing your existing life insurance and purchasing additional coverage if needed should be a top priority for new parents.
Homeowners Insurance Needs Regular Reviews
Purchasing your first home is a major milestone that necessitates an immediate review of your homeowners insurance. The type of policy, amount of coverage and insured assets will all change significantly compared to renting. But even once you settle in, it's wise to review your homeowners coverage at least annually. As you make upgrades to your home or acquire additional possessions, the value that needs protection can increase. Home insurance reviews are also important preceding renewal periods when insurers may make changes to coverage options or pricing.
Retirement Brings New Insurance Considerations
Retiring is the culmination of decades of hard work, and you'll want to protect your nest egg. One priority is reviewing your life insurance needs as you transition away from steady employment income. You may be able to reduce coverage once major expenses like mortgages are paid off. Health insurance also needs careful evaluation as you become eligible for Medicare. Reviewing the gaps in Medicare and comparing supplemental policy options will ensure you have adequate health care protection. Auto insurance is another area for potential cost savings, as retirees often drive fewer miles each year.
Review Insurance Annually for Potential Savings
In addition to major milestones, there are good reasons to review all your policies at least once a year. Rates, discounts and coverage options could change from one year to the next. You also may have access to new cost-saving opportunities as insurers introduce special incentives.
Look for Ways to Bundle and Save
Most insurance companies offer multi-policy and multi-line discounts. The more policies you can bundle together, the more you can potentially save. Home and auto policies are commonly combined for an added discount. Review all your existing coverage to see if consolidating them with one provider makes sense financially. You may also gain leverage to renegotiate rates by discussing competitor quotes during an annual review.
Maintain a Good Driving Record for Auto Discounts
Auto insurers reward safe driving habits. Maintaining a clean driving record for 3-5 years can gain you access to good driver discounts resulting in significant savings. Insurance reviews help you monitor your eligibility for these types of incentives over time. Ask your provider what steps you need to take to qualify for the best possible rate class. Review accident forgiveness protections and other options to offset rate increases if you happen to have a claim.
Compare Rates Annually to Find Savings
Insurance is a very competitive industry, with insurers frequently adjusting rates to gain market share. The cheapest provider one year may not be the most affordable the next. That's why experts recommend comparing quotes from multiple insurers every 12 months at minimum. You can use online insurance marketplaces to easily gather rate estimates during your annual review. Switching companies could potentially save you hundreds of dollars a year. But make sure to compare policies carefully, not just premium costs.
Avoid Gaps in Coverage With Regular Reviews
In addition to saving money, reviewing your insurance regularly helps avoid unpleasant surprises should you need to file a claim. Your life circumstances and assets tend to change over time. Without periodic check-ins, you might miss important opportunities to update coverage.
Update Home Insurance to Current Rebuilding Costs
If your home was destroyed in a fire or other disaster, your homeowners insurance would need to cover the full rebuilding cost. Construction costs rise over time, so the dwelling coverage limit that was adequate when you purchased your home may no longer be sufficient. During your annual review, contact your insurance company to ensure your policy reflects current reconstruction values. This small step protects against being underinsured down the road.
Account for Rising Healthcare Costs
Medical costs consistently outpace broader inflation each year. If you set your health insurance coverage limits and simply renew the same policy annually, you will likely find yourself underinsured over time. Review your current health plan and raise coverage caps to account for healthcare inflation. Also take advantage of opportunities to contribute more to tax-advantaged accounts like HSAs and FSAs during open enrollment or plan reviews.
Update Life Insurance Needs Regularly
As your income and family circumstances change, so do your life insurance needs. Having a new baby, paying off your mortgage, or retiring from work can all impact the appropriate amount of death benefit protection. Make it a priority to evaluate coverage adequacy any time you experience a major life change. Many employers offer life insurance plans that allow you to increase coverage over time without additional medical exams. Taking advantage of these opportunities during an annual review helps avoid future gaps.
Timing Your Insurance Reviews for Maximum Benefit
Now that you know why regular insurance reviews are essential, let's discuss the optimal timing to schedule periodic check-ins. Mark your calendar to review policies around these key events for maximum impact.
Set Annual Reminders to Review All Policies
Rather than leave it to chance, set up annual reminders to review your insurance plans. The start of each year or your birthday work well for this recurring task. Gather all your policy documents in advance and reach out to providers with any questions. Ask about new discounts you may newly qualify for and discuss any coverage gaps based on life changes over the past year.
Review When Policies Renew to Get the Best Rates
Most insurance policies renew annually, which offers a prime opportunity to review options and pricing. About 2 months before renewal, start shopping around and comparing competitor rates. Use this leverage to negotiate the best price from either your current provider or a new company. Don't automatically renew without checking the market first.
Adjust After Major Purchases Requiring More Coverage
Buying a luxury vehicle, building an addition on your home, or renovating your kitchen all impact insurance needs. Schedule a review as soon as possible following major purchases or home improvements to ensure adequate protection. Even new acquisitions like jewelry, collectibles and electronics may warrant adding riders to homeowners or renters policies. Don't wait until disaster strikes to update insured values.
Who Can Help Review Insurance Needs?
Does the thought of reviewing all your insurance policies seem daunting? Don't go it alone. Take advantage of free resources and professionals who can help.
Connect With a Broker to Shop Plans
Insurance brokers have access to policies from multiple companies and can quickly compare options for you. Having a broker you trust handle the heavy lifting each year can take the hassle out of insurance reviews. They can also suggest ways to optimize coverage that you may have overlooked.
Consult Financial Planners for Unbiased Advice
Fee-only financial planners look at your whole financial picture when making policy recommendations. Unlike agents who just sell insurance, planners have no stake in getting you to buy. Their personalized advice helps ensure you have proper coverage without overspending. Consider consulting a planner for periodic insurance reviews.
Learn From Educational Resources
Non-profit organizations like Life Happens offer free insurance needs calculators and other useful consumer resources. Their experts have no agenda other than providing unbiased information to help you make smart insurance decisions. Take advantage of these types of tools as part of your annual review.
Putting It All Together
Reviewing insurance policies regularly is essential to protect what matters most—your family and assets. While it may seem tedious, taking just an hour or so each year to re-evaluate coverage could end up saving you thousands of dollars. It also ensures you don't experience gaps that could put your finances at risk if the unthinkable occurs.
Schedule annual reviews and make insurance optimization a priority around major life events. The peace of mind alone is worth the minor time investment. Protect yourself, your loved ones and your hard-earned assets by staying on top of your insurance needs.