Doing an annual review of your budget and retirement savings is a smart way to make sure that your finances are on the right track. But an often overlooked aspect of saving money and building financial security is scrutinizing your insurance.
In fact, 66 percent of policyholders never or rarely check to see if they could get coverage for less, according to a 2015 Princeton Survey commissioned by insuranceQuotes.com. In addition to potentially leaving money on the table, you might have major life changes that should be factored into your insurance including:
— Having more or less income. — Getting married or divorced.
— Having or adopting children.
— Caring for aging parents.
— Starting a business.
— Retiring.
Without enough of the right types of insurance, everything that you’ve worked for could be in jeopardy. Take time for an insurance makeover and review how five types of coverage can protect your health, life, income, assets and personal possessions.
[See: 8 Big Budgeting Blunders — and How to Fix Them.]
1. Health Insurance. Health insurance is the most important coverage to have. Without it, you risk having to pay a huge medical bill if you have any kind of problem, from a broken bone to a chronic illness. Even a short hospital stay could cost thousands of dollars.
Although the future of the Affordable Care Act (also known an Obamacare) is uncertain, don’t make the mistake of dropping coverage or not shopping your policy. It’s likely that President Donald Trump’s proposed changes to the healthcare law won’t go into effect until 2018 or beyond.
Use an ACA Eligibility Calculator to see if you’re eligible for subsidized benefits including Obamacare, Medicaid, Medicare and the Children’s Health Insurance Program.
[See: How to Pick a Health Insurance Plan.]
2. Life Insurance. Life insurance is critical when you have family or friends who would be hurt financially by your death. There are two basic kinds of coverage: term and permanent.
— Term life insurance provides a benefit for a set period of time, such as 10 or 20 years, for a relatively low cost.
— Permanent life insurance provides a benefit for your entire life that also includes a cash value, but at a higher cost than term.
Life insurance isn’t just for breadwinners. If you have a stay-at-home partner or spouse who cares for your children, you likely also need a policy on his or her life to cover future child care costs.
If you’re single, or don’t have anyone who depends on your income, you may only need a small life policy or none at all.
3. Disability Insurance. Disability insurance is one of the most important, yet often overlooked, types of coverage. It pays a percentage of your income if you can’t work due to an accident or illness.
Don’t forget that health insurance pays a portion of medical bills, but won’t cover expenses like food or housing if you can’t earn an income for an extended period of time. If you have a long-term disability, it could cause a major financial strain for you or family members who depend on your income.
4. Auto Insurance. Some amount of auto insurance is required by most states. A basic policy includes three parts.
— Property coverage: Pays for damage to your vehicle caused by a collision (with another car, object or animal), vandalism, theft or natural disaster.
— Medical coverage: Pays the cost of medical care and lost wages if you hurt someone in an accident.
— Liability coverage: Pays for your legal obligations if you’re found at fault for damaging someone’s property or hurting them in an accident.
You can choose the types and amounts and coverage you need. Be sure to have enough liability to cover the total value of your non-retirement assets, such as your home, vehicles and savings, if you were involved in a lawsuit.
Rates vary depending on many factors, including your vehicle, driving history, annual mileage, credit (in most states), marital status and occupation. So, if you don’t shop at least once a year, you may be missing an easy way to save money. You can compare quotes at sites like insuranceQuotes.com and netQuote.com.
5. Homeowners or Renters Insurance. If you own a home, having homeowners insurance is a requirement when you have a mortgage. A basic policy pays for damage to your home and personal belongings due to a covered event, such as a fire, tornado, hurricane or hail storm.
[See: 10 Costs Homeowners Insurance Doesn’t Always Cover.]
Certain types of personal belongings, such as electronics, jewelry, computers and firearms, are subject to coverage caps. So, if you bought or received valuable items as gifts, be sure to have ample coverage. Adding a rider for extra coverage can be an inexpensive addition.
Home insurance also includes liability that protects you if a visitor gets hurt on your property. It also covers you and other members of your household (including pets) who accidentally injure someone while away from home. Just like with auto liability, make sure you have enough coverage to really be safe.
If you’re a renter, you also need renters insurance for liability protection and to cover theft or damage to your personal belongings due to a covered event. Coverage is inexpensive, but studies show that most renters don’t have a policy and overestimate the cost.
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