Ten Questions to Determine Whether You Need to Update Your Coverage
INSURANCE INFORMATION INSTITUTE
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NEW YORK, January 22, 2007 - Major purchases and lifestyle changes such as marriage, divorce or retirement can have a profound effect on your insurance, according to the Insurance Information Institute (I.I.I.)
"To make the most of your insurance dollars, it is very important that you let your insurance agent or company representative know about alterations to your home and other major events in your life," says Jeanne M. Salvatore, senior vice president and consumer spokesperson for the I.I.I. "A great way to start the new year off on a firm financial footing is to discuss your current insurance needs with your agent, broker or company representative to make sure that it is up-to-date."
At least 32 million U.S. households own insurance policies that aren't right for them; in 2006 58 percent of homes were undervalued-by an average of 21 percent-relative to what it would cost to rebuild.
To ensure that yours is not one of those households, the I.I.I. recommends asking the following ten questions:
If you are merging two households, you may need to update your homeowners insurance. And you may want to consider increasing your insurance for any new valuables received as wedding gifts, and for jewelry such as wedding and engagement rings.
After getting married, it is also important to review your life insurance needs. Becoming a couple means sharing responsibility with and for someone else; life insurance is an excellent way to ensure that the surviving spouse is taken care of in the event of the premature death of the other spouse.
If you got divorced, you will probably no longer be sharing a car and may move to a smaller home-you should inform your insurer as this will mean setting up separate auto and homeowners policies.
If you're planning for your life insurance to match your survivors' expenses after your death, the new child will likely add to those expenses-requiring more life insurance to keep them secure. If you plan to save for your child's college education, life insurance can assure completion of that plan. Don't forget to update the beneficiary designations on your life insurance to include the new child.
Also, encourage your kids to get good grades and to take a driver training course. Most companies will give discounts for getting at least a "B" average in school and for taking recognized driving courses.
If your teenagers move at least 100 miles from home-say to go to college-you can get a discount for the time they are not around to drive the car. This, of course, assumes that they leave the car at home!
For more information, see How do I insure my teen driver?
In the case of a salary increase, you may have taken on additional financial commitments that your survivors will depend on. Make sure to review your life insurance program to see whether it is adequate to maintain those commitments.
If your salary decreased, you may want to cut your life insurance premiums. Fortunately, life insurance premiums in general have been getting cheaper, so if you shop around you may pay less for the protection. If you have two or more policies you can combine the death benefit amounts into one policy to qualify for a lower rate because you reach a "milestone" amount of insurance. (For example, at many companies, $500,000 of insurance costs less than $450,000 because of the "milestone" discount.) But don't drop existing life insurance until after you have a new policy in place.
Nearly 40 percent of homeowners who say they have "significantly remodeled their homes" have not updated their homeowners insurance to reflect the new value of their homes. This means almost 8 million American homes are improperly insured-make sure yours is not one of them.
Don't forget about new structures outside of your home. If you have built a gazebo, a new shed for your tools or installed a pool or hot tub, you need to speak to your agent.
If, as part of the renovation, you purchase furniture, exercise equipment or electronics, you may need to increase the amount of insurance you have on your personal possessions. Keep receipts and add any new items to your home inventory.
For more information, see Remodeling your home.
In the event you have already bought a vacation home, don't skimp on the insurance. The risk of theft or disaster is just as significant, if not more so, in a second home as in your primary residence.
If your new property is close to the water, be sure to ask about flood insurance. Damage to your home or belongings resulting from flood is not covered under standard homeowners insurance policies. Flood insurance is available from the National Flood Insurance Program (NFIP), and is generally sold though many private agents and brokers. You can ask your agent or representative whether your home might be at risk for flood. The NFIP Web site ( http://www.floodsmart.gov/floodsmart/pages/index.jsp ) also has a handy tool for assessing your flood risk-just enter your address, and it will tell you your level of risk ( http://www.floodsmart.gov/floodsmart/pages/riskassesment/findpropertyform.jsp ). Some homeowners insurers do offer flood coverage in excess of the NFIP policy.
For more information, see the Homeowners Insurance Checklist.
To create your personal home inventory, download the I.I.I.'s free Home Inventory Software.
Regardless of whether you are an owner or renter, you will have the following options when it comes to insuring your possessions:
Think carefully about what your financial position would be in the aftermath of a disaster, and make sure you have the type of policy that is right for you.
As part of your annual review, it is always a good idea to talk with your insurance agent or company representative.
For more information on insurance and financial planning for different stages of your life, see the Life Stages tool at http://www.iii.org .
The I.I.I. is a nonprofit, communications organization supported by the insurance industry.