As adults, we’ve come to realize and accept that while insurance isn’t a fun or exciting topic, it is important in our financial journey. Insurance acts as a safety net for us. It provides financial assistance to help cover costs when bad things happen such as a car accident, house fire, or health issue.
Insurance though can be expensive, depending on the type of insurance it is, but there is something you can do. That something is taking the time to evaluate all of your insurance coverage each year.
Evaluating your insurance policies on a yearly basis is beneficial for a few reasons
- You could potentially save money
- You can ensure that you have the right coverage to protect yourself and your assets
- Your life situation may have changed (e.g. you moved, got married, had kids, started a new job, etc.) which can trigger a need to change or update coverage
- You’ve bought something that needs to be insured or sold something that no longer needs to be insured such as a house, boat, or car.
I used to evaluate my insurance policies when I had a life change or whenever I thought about it. As I’ve gotten older and realized how beneficial it is I’ve made it a goal to evaluate my insurance policies on a yearly basis. Because of that I’ve done some research and have some experience doing this that I will be sharing in this blog post as well as some tips for how to evaluate your policies.
Related read: The Types of Insurance Every Homeowner Should Consider
Car insurance
Let's start with car insurance. If you own a car, you're required by law to have car insurance. However, just because you have car insurance it doesn't mean that you have the right or even the best coverage.It's important to evaluate your car insurance policy each year to make sure that you have enough coverage in case of an accident or other incident. This can also help you determine if you have some types of coverage you don’t need such as roadside assistance which you can get through AAA or gap insurance if your car is paid off. You do want to be careful though that you don’t drop or lower coverage that you may need such as uninsured drivers or comprehensive and collision.
Checking to see if you're eligible for any discounts, such as a safe driver discount, paying in full, or a discount for bundling your car insurance with other policies can help lower your car insurance costs.
Also, increasing your deductible can help to lower the policy costs. Just make sure you have the cash available to be able to pay the deductible if you do increase it.
I personally have a higher deductible and bundled my car with other insurance to get a discount.
Health insurance
Health insurance is another important type of insurance to evaluate each year. Health insurance can be expensive, but it's necessary to have it in case of a medical emergency.When evaluating your health insurance policy, you should check to see if your plan covers all of the services you need, such as prescription drugs, preventive care, and mental health services. You should also check to see if your plan has any exclusions or limitations that may affect your coverage.
One way I’ve saved some money on health insurance is to go with a high-deductible plan. I only went this route because of my age, I’m in good health and could cover the higher deductible limits with cash I have on hand.
Life insurance
If you have dependents, life insurance is a must-have. Life insurance can provide financial support to your loved ones in case something happens to you. Especially if you bring in most or all of the income for the household.When evaluating your life insurance policy, you should check to see if your coverage is still adequate for your needs. You may need to increase your coverage if you've had a child, bought a home, or had a pay increase. You should also check to see if your policy has any exclusions or limitations that may affect your coverage.
I recently changed my life insurance provider because I found I could get a similar policy for $20 less per month. That may not seem like a lot of money but it’s $120 a year that I could be investing or saving. It adds up over time.
Related read: Why You Should Consider Getting Life Insurance
Homeowners/renters insurance
If you own a home, homeowners insurance is required. If you're a renter, renters insurance is highly recommended. Homeowner's and renter’s insurance can protect your personal property and provide liability coverage in case of an accident.When I rented I had renters insurance because I would hear horror stories of renters that didn’t and would have to start completely from scratch using solely their savings when something happened to their belongings. I didn’t want that to happen to me. The landlord's insurance doesn’t cover your belongings.
When evaluating your homeowners or renters insurance policy, you should check to see if your coverage is still adequate for your needs. For example, your home value may have increased or costs to rebuild homes could have shot up (think 2020 - 2022). The coverage you started with may not cover that increase as not all insurance companies will automatically increase your coverage and if they do it may not be enough.
When home values and building materials had started to increase, I evaluated my homeowner’s policy, realized I needed to increase my coverage, and reached out to my insurance agent.
When evaluating your homeowner's policy, also check to see if you're eligible for any discounts, such as a bundling discount or a discount for having certain safety features in your home.
Tips for evaluating your insurance
Now that we've discussed why it's important to evaluate your insurance policies each year and some things to look for in the different types of policies, let's talk about how to evaluate your policies. Here are some tips to help you get started:Review your policies
This seems silly but the first step in evaluating your insurance policies is to review them. Take the time to read through each of your policies and make sure that you understand what is covered and what is not covered.Assess your needs
Once you've reviewed your policies, assess your needs. Have your circumstances changed since you last purchased your insurance policies? Do you need more or less coverage? Make sure that your policies are still meeting your needs.This may be a time when you need to do a little research online or you can talk to an insurance broker. These are independent insurance agents, meaning they don’t work for a specific insurance company and don’t make a commission if you get a policy with a particular company. They get paid when you purchase a policy period regardless of the company. So they want to make sure you’re happy with your policy so they can get your repeat business and have you tell all your friends.
Related read: 14 Ideas For Sinking Funds To Include In Your Budget
Shop around
Don't be afraid to shop around for insurance policies. You may be able to find a better deal or a policy that better meets your needs. An insurance broker can also help you with this as they can provide quotes from multiple companies based on your needs.Just be sure to read and compare the policies carefully to make sure you know you're getting the coverage you need at a price you can afford.
Ask about discounts
Finally, ask about any discounts that you may be eligible for. You may be able to save money by bundling your policies, having a good driving record, or having certain safety features in your home.Final words
As you can see, evaluating your insurance policies each year is important to ensure that you have the right coverage to protect yourself and your family.
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