There are important reasons to reassess all your insurance coverage periodically.
Over time, your insurance needs are likely to change. Insurance companies offer innovations and riders that might be applicable to your situation. Reevaluating your insurance can lead to lower premiums with coverage better suited to your situation. When reviewing your insurance, keep the following points in mind:
Life insurance. When assessing your life insurance coverage, first decide why you need the coverage. The primary purpose of life insurance is to ensure that your family has adequate resources to maintain their current lifestyle if you die. But life insurance can also serve other purposes, such as providing liquidity to an estate or enabling business partners to buy out a deceased partner's heirs. Make a detailed analysis of how much insurance you need, then carefully decide whether you should purchase term or cash-value insurance.
Health insurance. Review all health options offered by your employer. Don't assume that your health coverage from work is adequate — you may need supplemental protection. Make sure your policy covers very large claims, with lifetime benefits.
Disability income insurance. Disability income insurance pays you a monthly income if you are unable to work due to illness or injury. However, most policies limit the percentage of your income that they will pay to 60 percent to 80 percent. Many employers only offer short-term coverage, so you may need to purchase long-term coverage.
The advantage of paying the premiums yourself is then you do not have to pay income taxes on any benefits received. Pay special attention to how disability is defined in the policy, since this will impact when you can collect benefits. Ways to reduce premiums include increasing the waiting period and benefit period. However, you probably want to ensure that benefits extend to at least age 65.
Long-term-care insurance. You should consider this insurance as you near age 60. Recent policies offer more extensive coverage than policies issued a few years ago, so check any existing policies thoroughly. Give careful thought to your desired waiting period and benefit period, since these will significantly impact your premiums. Make sure that both home health care and nursing home care are covered.
Homeowners insurance. In addition to protecting your home, most homeowners policies also cover household furnishings, personal liability for individuals hurt on your property, personal property in your possession while you are away from home, extra living expenses if your home is damaged, other people's property that you damage, damage to landscaping, and liability for fraudulent charges on your credit cards.
Obtain coverage based on the cost of replacing your home, not on its market value or purchase price. Guaranteed-replacement cost coverage ensures that your coverage keeps up with inflation. Ask for a list of discounts to see if there are ways to reduce your premium. Raising your deductible amount can keep premium costs down. Personal possessions are generally capped at 50 percent to 70 percent of your dwelling coverage, while certain items such as jewelry have specified dollar amounts. Obtain riders to increase this coverage if needed. Make sure your possessions are covered for replacement value.
Automobile insurance. In most states, automobile owners are required to carry some insurance, usually bodily injury and property damage liability. Many people also obtain coverage for medical expenses, protection from uninsured motorists, comprehensive physical damage, and collision damage to the car. Find out what discounts are available. Raising your collision and comprehensive deductibles can significantly reduce your premiums, but don't skimp on liability coverage.
Personal liability insurance. Personal liability insurance covers you once the liability limits of your automobile and homeowners policies have been exceeded. It also covers risks not included in other policies, such as claims for libel, slander, invasion of privacy, and defamation of character. The cost is typically reasonable, so it pays to obtain large amounts, especially if you are protecting a high net worth.
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