How to send your insurance to rehab
Have you been neglecting your insurance policies, letting them wander aimlessly from renewal to renewal? Most people do. And that’s when insurance policies start a downward spiral. Your insurance policies might even need rehab. Here’s a 10-minute guide to getting your auto and home insurance back on the wagon.
Your car insurance
Ask yourself: Has my wealth increased?
If your wealth has increased, it’s wise to have enough insurance in case you cause a car accident and are sued. Damage you cause can exceed your liability limits, and you’re on the hook for the remainder. The Insurance Information Institute (III) recommends you carry $100,000 of bodily injury protection per person and $300,000 per accident. Other insurance industry experts also recommend buying a minimum of $50,000 in property damage liability coverage.
“Life changes and your policy needs to change with what’s happening in your life,” points out Loretta Worters, spokesperson III.
Paying higher car insurance rates for better coverage is the price of wealth.
Ask yourself: Do I still need comp & collision?
If you have an older car, find out how much it’s worth. Comprehensive and collision coverage is the most expensive chunk of your car insurance quote. Unlike property damage liability, comp & collision coverage pays for damages to your own vehicle. If you total your car, it will pay you for the actual cash value of your car. As a general rule, it doesn't make sense to buy comprehensive and collision coverage for a car worth less than $1,000, according to III.
Ask yourself: Who’s driving my car?
Your car insurance policy may pretend it doesn’t know you if you haven’t listed all the drivers in your household. If you’ve gotten married or moved in with a significant other, you need to update your policy if they’ll be driving your car. If you don’t, your coverage could be jeopardized.
If you have a teen driver in your household who – Lord help us – is now driving and you forget to report it, your auto insurance company can charge you back premiums from the date he or she received a driver’s license (although it’s unlikely your claim will be denied in the event of an accident).
Your home insurance
Ask yourself: Did I make renovations or improvements to my home?
If you've added a new addition to your home – including a garage or a pool – you need to tell your home insurance company. Any external structures or additions to your home that increase its value need to be reported. Otherwise, your home insurance coverage may be inadequate. While some improvements may be obvious, others aren’t. Tully Lehman, spokesperson for the Insurance Information Network of California, says that many people forgot the little things. “Did you remodel the kitchen or the bathroom or change the cabinets and countertops?” he asks. “If last year you had laminated countertops and this year you’ve got marble, there’s a huge difference” in how much it would cost to replace them.
Ask yourself: Do I have enough insurance to rebuild my home in today’s economy?
If your home were to suffer catastrophic damage – such as a fire or a natural disaster – make sure you have enough insurance to rebuild your home. Construction costs generally increase over time, so the policy you bought 10 years ago is likely lagging behind today’s costs. Also, keep in mind that demand increases for labor and materials following a widespread catastrophe (like a hurricane). Chances are that your house will cost much more to rebuild after a major disaster.
If you live in a coastal area that is prone to natural disasters, ask your insurance agent about purchasing an "extended replacement cost" rider. Lehman says this rider can provide additional coverage over the limits of your home insurance policy, anywhere from 15 to 25 percent over (depending on your insurer).
Ask yourself: Did I buy new stuff?
If you’ve made any major purchases during the past year, ask your agent if your current policy is sufficient to cover them. Anything from a new flat screen TV to jewels and furs are worth mentioning. In some cases, your insurer may suggest an endorsement for a particularly expensive.
There are some purchases that may actually save you money. “If you have a new alarm system for your home, whether it be burglar or fire, that is something that could afford you a discount,” says Lehman. Insurance companies smile upon these items because they increase the security and safety of your home – making it less likely you’ll file a claim.