If you have a good insurance company, it is easy to get a little lazy about your insurance policies. They renew each year, and maybe you call to update information when you move, but generally it is easy to forget about them. I'm here to encourage you to take a little time to make sure that you have the coverage that you need, and that your policies are based on the right information. This includes auto, homeowners, renters, umbrella, and any other type of insurance you may carry
I can't speak to all insurance companies, but I use USAA and it was relatively quick and easy to do online. I was surprised to see that there were quite a few little things that were listed incorrectly in my policies, such as the age of the roof on one house, and security system information for a different house.
Here are some things you may want to check:
Coverage Levels
How much coverage do you need? That's a difficult question, and the answer depends on your tolerance for risk and your financial capacity to absorb the costs of a loss. It would be a lot easier to pick if we all had crystal balls.
While every state (that requires insurance) has its own minimum required coverage for vehicles, you may want or need coverage beyond the minimum. In most cases, I think it is pretty safe to say that you probably want more than the minimum coverage. Minimum coverage is generally low. For example, in California, the required property damage liability is only $5,000 per accident. That's not going to cover very much, and you'll be stuck with a huge mess if you cause even a relatively small accident, especially if it involves expensive vehicles or more than one other car.
For your homeowners or renter's insurance, you need to consider the value of all your possessions. You may not think you have much, but it adds up fast. Uniforms, clothes, furniture and electronics are not cheap!
If you carrying umbrella liability insurance, you'll need to make sure that the coverage on your underlying policies equals the required coverage for your umbrella policy.
Deductibles
A deductible is the amount of a loss that you'll pay, even if insurance is used. In general, the higher the deductible, the lower the premium. You want to choose a deductible that you can afford to pay. Do a little playing around to see which combination of deductible and premium makes sense to you.
For example, it costs me around $44 a year to lower my vehicle deductibles, both comprehensive and collision, from $1,000 to $500. I would have to go eleven years without making a claim to make up that difference. On the other hand, lowering my deductible from $1,000 to $100 would cost me $158 a year. Keeping the higher deductible will save me money if I go five and a half years without making a claim.
Is that a good decision for me? That depends on a wide variety of factors.
- Likelihood of having an at-fault accident.
- Likelihood of having a claim under the comprehensive portion of your policy (things other than collision with another vehicle, such as hail, theft, or hitting an animal.)
- Whether I have the money to pay for the deductible.
- If I'll save that money in my deductible account or just spend it elsewhere.
You don't have to carry the same deductible on each vehicle or each type of coverage. You can mix and match, depending on your personal tolerance and risk factors.
Some types of coverage, such as earthquake coverage, may have a set deductible that you can not change.
Your Details
Every policy premium is based on the a combination of many small factors. If any of these details are listed incorrectly, it could impact your premium and possibly even whether your insurance will cover you if you have a loss. You have an obligation to ensure that your details are correct. Things to verify include:
- yearly mileage driven on each car
- whether you want additional coverage such as roadside assistance or rental reimbursement
- the details of your home, such as size and construction
- security alarms or fire suppression systems
- age of key features, if requested
- amount of coverage, particularly for personal items
- any other detail appropriate to your situation
This is not a comprehensive list of everything you should consider. I'm not sure there could be such a list, because every person has unique insurance needs. If you are not comfortable making these choices yourself, seek help from your insurance company and/or a trusted advisor.
