How to Review Your Insurance Coverage Each Year

Once a year, usually a month or so before your biggest policy renews, pull out every policy you have and ask one question: does this still fit my life? A new car, a renovation, a baby, or a raise can all leave coverage that’s too thin or too expensive. An hour with your declarations pages can save money, or save you from a nasty surprise after a claim.

Gather the paperwork

For each policy (auto, homeowners or renters, health, life, disability, umbrella), find the declarations page. It lists what you’re covered for, the limits, the deductibles, and the premium. Note the renewal date of each.

Then list what’s changed since last year: a move, a home improvement, a new driver in the household, a new job, a marriage or divorce, a child, expensive purchases, a side business run from home. Each of these can change what you need.

Home or renters

The NAIC recommends reviewing home or renters coverage every year. Check:

• Dwelling coverage. Would it pay to rebuild your home at today’s construction costs? That’s often different from the market value or what you paid.
• Personal property. Walk through your home with your phone and record a quick video. It doubles as an inventory if you ever file a claim.
• Valuables. Jewelry, art, and collectibles often have low limits unless you add a rider.
• Flood and earthquake. Standard homeowners policies generally don’t cover flooding. Flood insurance is a separate policy and usually has a 30-day waiting period, so don’t wait for the forecast.

Auto

Check that every driver in the household is listed and that your liability limits make sense for what you’d stand to lose in a lawsuit. If your car is older and worth little, collision and comprehensive coverage may cost more than they’d ever pay out. If you work from home now and drive much less, tell your insurer; mileage affects the rate.

Health

During open enrollment, compare more than the premium. HealthCare.gov suggests looking at deductibles, copays, coinsurance, the out-of-pocket maximum, and whether your doctors and prescriptions are in the network. If you expect a big medical year, a plan with a higher premium and lower out-of-pocket costs can come out cheaper overall.

Life and disability

Ask whether your life insurance would still cover what it’s meant to: paying off the mortgage, replacing your income for some years, paying for kids’ education. Check the beneficiaries, especially after a marriage, divorce, or birth. An outdated beneficiary form usually overrides your will.

If your household depends on your paycheck, check whether you have disability coverage through work, and how much of your pay it would replace.

Shop, but compare like with like

When you get quotes, use the same limits and deductibles so you’re comparing prices for the same coverage. Ask about bundling and other discounts. In many states, insurers can use a credit-based insurance score in pricing, so keeping your credit in good shape can help. Never cancel an old policy until the new one is active.

Choosing a higher deductible lowers premiums, but only makes sense if you could pay that deductible from savings tomorrow. Emergency Savings or Extra Debt Payments and Creating a Personalized Budget can help you size that cushion.

Write it down

Keep a one-page summary listing each policy, the insurer, policy number, claims phone number, renewal date, and premium, and tell someone you trust where to find it. Put the next review on your calendar, and do an extra one after any big life change. Financial Planning for Different Life Stages lists the life events that usually call for one.

Sources

• NAIC: Your annual insurance check-up
• NAIC: Credit-based insurance scores
• HealthCare.gov: Your total costs for health care
• FEMA FloodSmart: Flood insurance basics

This article is for educational purposes and is not financial advice.