News & Insights

When Is the Best Time for an Insurance Review?

By Fairport Wealth

By Deborah B. Feldman, CFP^®

We come across advertisements for insurance everywhere we turn, or so it seems. Whether it’s in a magazine, on television, on the radio, or plastered on a billboard, there’s Flo from Progressive, LiMu Emu and Doug from Liberty Mutual, and Mayhem from Allstate. How many of us enjoy the comedic value of these campaigns to the point that we ignore the importance of having the right coverage? How many of us consider changing our insurance for better coverage or for comparable coverage at a lower cost? We should think about our insurance coverages, including homeowners, auto, umbrella, life, disability, and long-term care among others.

Do you read through the fine print of your coverage at renewal time? One of our Florida clients had their advisor do that for them and it saved them $20,000. The advisor noticed there was an endorsement for lanai coverage available and called the agent to ask how much coverage the client could get and at what cost. It turns out the annual premium for the lanai coverage was around $49.  Our client added the coverage in February; the lanai was destroyed by a hurricane in October. Although the cost to replace the lanai was $22,500, our client’s out-of-pocket was $2,500; the $20,000 remainder was covered by the lanai endorsement.

Whether or not you’ve made improvements that increased your home’s value, it’s a good idea to make sure your home is properly insured in the event of a fire or other disaster. Does your policy have cost-to-rebuild coverage? If not, and if calamity strikes, you may only receive an insurance company check for the home’s pre-calamity depreciated value. If someone is injured in your home, do you know how much the insurance company will pay if the injured party sues you and is awarded damages? Do you or should you have extra or separate insurance for your jewelry?

When was the last time you reviewed your auto insurance coverage? If you’re in an accident, will your insurance pay for a rental car? Are the insurance limits for liability appropriate for your situation? Do you have excess liability coverage to protect your net worth in the event of a lawsuit resulting in a judgment against you that’s more than your basic policy limits? Say you’re involved in an accident, that your policy states that it will pay up to $300,000 per covered accident, and that the injured driver sues you and is awarded $1,000,000 in damages. If you have $1,000,000 in excess liability insurance, your basic and excess coverages will take care of the entire judgment. Without the excess liability insurance, you’d be responsible to pay $700,000 ($1,000,000 judgment minus the $300,000 your basic policy covered).

People have different opinions when it comes to the merits of purchasing and continuing life insurance coverage. For those committed to purchasing or continuing life insurance and for those evaluating the advisability of doing so, the many different types of policies offered (whole life, term, universal, etc.,) and the complicated policy structures of some products can make for a difficult “shopping trip.” We can evaluate your unique set of circumstances and help you make an informed decision on purchase, retention, policy surrender, and sale to third-party purchasers.

We firmly believe that everyone should have a financial plan, and that the plan should have a detailed consideration of insurance coverages as one of its components. We’ve no doubt that Flo, LiMu Emu, Doug, and Mayhem would concur with that belief.