Insurance New Year’s Resolutions
During this time of year, many people make New Year’s resolutions. Examples include eating healthier, losing weight, paying off debt, or finally starting that business you have been talking about for the past few years. One area of your finances where it makes sense to create some resolutions for the New Year is with your insurance coverage.
Now is a good time to examine the insurance policies you have, whether you have too much or too little coverage in your policies, and how you can save money on the overall cost of your insurance.
Here are five tips to help ensure that you have the right insurance coverage to fit your needs during the New Year and beyond:
Update your Auto and Homeowner Policies: Many people keep the same auto and homeowner policies for years or even decades. But as your needs change, it makes sense to look at these policies and see if there are any changes you should make. One thing to look at right off the bat is bundling the two policies with the same carrier if you haven’t already done so. Many companies offer multi-policy discounts, which could save you some money.
If you have teenage drivers, find out if your insurer offers a discount for good grades. And if you have recently turned 55, your insurer probably offers a discount for taking a “55 Alive” mature driver program. Finally, do some research to find a better deal on auto and homeowner insurance. It pays to look around at least every year or two to find out what else is out there.
Update your Life Insurance Policies: Do you currently have life insurance? If not, consider whether or not you might need it. If you have a family, you should definitely have some type of life insurance coverage to provide for your loved ones in the event of a worst-case scenario. How much you need and how long you need it for are questions only you can answer. Generally, you should have enough coverage to at least pay off all your debts and replace your income until your youngest child turns 18. You might also want additional coverage to pay for their college. The type of policy (term vs. permanent life insurance) is a frequent subject of debate. To find out more details about your life insurance coverage needs, speak with your agent.
Consider Disability Coverage: If you are one of the breadwinners in your house, your most important asset is your ability to bring home a paycheck. That being the case, it stands to reason that you would want to insure this asset. Disability insurance provides the coverage you need in case you are no longer able to work. Some people mistakenly believe that they can get this coverage through their employer’s workers’ comp policy or through Social Security Disability Insurance (SSDI).
The problem is that workers’ comp only covers work-related injuries, and there are other potential loopholes and restrictions an employer could use to deny coverage. SSDI is a complex system in which the majority of applicants are denied during the initial phase. Unless your condition is an exact match to one listed in the Social Security Administration’s Blue Book (which is very rare), there is a very good chance you will be denied. If you are unable to access either workers’ comp or SSDI, you will need a disability policy to help ensure that your family stays financially solvent.
Build a Large Emergency Fund: You may ask, “What does an emergency fund have to do with insurance?” And the answer is quite a bit, actually. For starters, an emergency fund is a form of self-insurance. But beyond that, a large enough fund can also allow you to save money on your insurance rates. Here is how it works: tuck away as much money as you can each month with the goal of eventually having enough saved to replace your net income for a year. This may take a few years or so depending on your disposable income.
Once you have a large enough emergency fund (a few thousand dollars at least), you can significantly raise your deductibles on your auto and homeowner’s policies and lower your premiums accordingly. With your disability policy, you can eventually choose the maximum elimination period (the period you have to wait until your coverage kicks in), which will also lower your premiums.
Speak with an Independent Insurance Agent: Everyone’s situation is unique, and your insurance needs will differ from your neighbor’s. There may be places where you are underinsured, and other places where you are over-insured. In addition, you may not have the right carrier for the particular type of coverage you need. If your agent is captive to one insurance carrier, however, you will never find out the answers to some of these questions. A captive agent can only offer what their carrier provides, and they of course have a vested interest in persuading you that their carrier can provide what you need.
Independent insurance agents do not have the same limitations that a captive agent has. Independent agents work with several of the top carriers in your area. And because they do not represent any one carrier, they are able to provide an impartial and objective assessment of your insurance needs and locate the right carrier and insurance policy to fit those needs.