I think we can all agree that this spring brought the most rain we’ve seen in several years. Along with the rain has come fears of flooding.
While flooding is an interesting beast in the eyes of insurance, it serves as a great reminder of the importance of a proper review of your property and casualty insurance.
Homeowners insurance is something many of us are familiar with. We purchase a home and seek insurance to protect us from a catastrophic event. However, often homeowners insurance is purchased and rarely reviewed.
Catastrophic events may or may not take place, thus leaving us unconcerned with the coverage in place. We recommend clients review their property and casualty insurance every few years to ensure it is still adequate.
Several key factors to consider: premiums (increases/decreases,) deductibles, amount of dwelling coverage and additional riders that may be included.
Premiums are subject to change on an annual basis and most often we only review this amount if there is an astronomical increase in premium.
Deductibles are also a key factor to review to ensure that no changes need to be made. This can be from the perspective of having deductibles that are too low or too high. An important factor in landing on a reasonable deductible is the balance in your emergency fund.
Lastly, dwelling coverage should be reviewed from either perspective, either not enough coverage or too much coverage. Keep an eye out for annual inflation adjustments to your dwelling coverage as this amount may be increasing on an annual basis. Depending on the inflation adjustment used by the insurance company, it may be inflating more quickly than the fair market value or rebuild cost of your home.
Perhaps you are renting your home or have children who are renting a home. Renters insurance should be a strong consideration for you/your dependents. While you don’t own the structure of the home, renters insurance provides coverage on your contents if a catastrophic events strikes. These policies are typically pretty inexpensive depending on the amount of coverage elected.
While homeowners insurance is often an overlooked area of your financial life when it comes to an annual review, auto insurance tends to be reviewed slightly more often. Usually a review is triggered by an auto accident or when teenage drivers appear on your policy and you notice an increase in premium.
Just as with homeowners insurance, we encourage clients to review the details of their auto insurance: premiums, deductibles and coverage limits.
The other variable to consider with auto insurance is if it’s worth the cost to have comprehensive and collision coverage vs. liability only. Again, this comes down to a decision based on the value of your vehicle based on age, mileage and condition of the vehicle.
Another piece of property and casualty insurance that is strongly worth considering is an umbrella policy.
This policy provides liability coverage above the limits on your homeowners and auto policies. This policy protects the insured in the event of a lawsuit either to the primary residence or in an auto accident.
For example, let’s assume that your auto policy has a liability limit of $250,000 but you are sued for $1,000,000 due to an at-fault auto accident. Umbrella policies are sold in million-dollar increments and would pick up the coverage in this instance from $250,000 up to $1,000,000. These polices frequently are inexpensive and worth the addition to your property and casualty insurance.
In addition to homeowners, auto and umbrella policies, there may be additional coverage you want to consider depending on where you reside or the assets you own. As mentioned at the beginning of this article, one great example is flood insurance. Many individuals have the notion that homeowners insurance provides coverage for flooding but that isn’t necessarily the case.
And don’t forget to inquire about discounts.
A common incentive of property and casualty insurance is the bundling discount for having multiple policies through the same company. While it’s not always the most advantageous cost, it’s always worth exploring. This also helps eliminate the risk for gaps in coverage when one insurance company oversees all the necessary coverage, especially if you carry an umbrella policy.