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III- Re Thinking your insurance needs

Major purchases and lifestyle changes such as marriage, divorce or retirement can have a profound effect on your insurance needs, according to the Insurance Information Institute (I.I.I.)

At least 32 million U.S. households own insurance policies that aren’t right for them, according to a survey by the Independent Insurance Agents and Brokers of America, Inc.

To ensure that yours is not one of those households, the I.I.I. recommends asking the following 10 questions:

  1. Have you gotten married or divorced?
    If you have gotten married, you may qualify for a discount on your auto insurance. Couples may well bring two cars into the relationship and two insurance companies, so take the opportunity to review your existing coverage and see which company offers the best combination of price and service.

    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.

  2. Have you had a baby?
    If you have recently added a child to your family, whether by birth or adoption, it is important to review your life insurance protection. According to a MetLife study of survivors (i.e., spouses and children) of someone who died “prematurely,” 39 percent had no life insurance at all. Of these families, 40 percent had children under age 18. Therefore, in about 16 percent of all cases survivors of premature deceased persons were families with young children of who had no life insurance.

    For more information on life insurance planning, see Learn about Life Insurance.

  3. Has your teenager gotten a drivers license?
    It is generally cheaper to add your teenagers to your insurance policy than for them to purchase their own. If they are going to be driving their own car, consider insuring it with your company so that you can get a multi-policy discount. And choose the car carefully—the type of car a young person drives can dramatically affect the price of insurance. You and your teenagers should choose a car that is easy to drive and would offer protection in the event of a crash.

    For more information, see How do I insure my teenage driver?

  4. Have you switched jobs or experienced a significant change in your salary?
    If you had life insurance through your former employer, and your new employer does not provide equivalent protection, you can replace the “lost” coverage with an individual life insurance policy.

  5. Have you done extensive renovations on your home?
    If you have made major improvements to your home, such as adding a new room, enclosing a porch or expanding a kitchen or bathroom, you risk being underinsured if you don't report the changes to your insurance company.

    For more information, see Remodeling your home.

  6. Have you decided to buy a retirement or vacation home?
    If you are searching for your dream vacation home or a second home you might retire to, make sure you research the availability and cost of homeowners insurance before you commit to the purchase. Often, the very factors that make a vacation home seem ideal—whether it is a waterfront property or a mountain retreat—can introduce risks that, together with the fact the home is likely to be vacant much of the time, can make it costly and difficult to insure.

    For more information on things to consider before buying a new home, see the Homeowners Insurance Checklist.

  7. Have you acquired any new valuables—jewelry, electronic equipment, fine art, antiques?
    A standard homeowners policy offers only limited coverage for highly valuable items. If you have made purchases or received gifts that exceed these limits, you should consider supplementing your policy with a “floater,” a separate policy that provides additional insurance for your valuables and covers them for perils not included in your policy, such as accidental loss. Before purchasing a floater, the items covered must be professionally appraised. Keep receipts and add the new items to your home inventory.

    For more information on floaters, see Do I need separate coverage for jewelry?.

    To create your personal home inventory, you can use the I.I.I’s free, downloadable software, Know Your Stuff – Home Inventory.

  8. Have you signed a lease on a house or apartment?
    If you are renting a home, your landlord is responsible for insuring the structure of the building, but not for insuring your possessions—that is up to you. Nevertheless, nearly seven in 10 renters say they do not have renters insurance, despite the fact that, according to the U.S. Bureau of Justice Statistics, rented households are burglarized at rates about 50 percent higher than owned households. If you want to be covered against losses from theft and catastrophes such as fire, lightning and windstorm damage, you should invest in renters insurance. Like homeowners insurance, renters insurance includes liability, which covers your responsibility to other people injured at your home, or elsewhere by you, and pays legal defense costs if you are taken to court.

    Regardless of whether you are an owner or renter, you will have the following options when it comes to insuring your possessions:

    • Actual cash value pays to replace your home or possessions, minus a deduction for depreciation.
    • Replacement cost pays the cost of rebuilding or repairing your home or replacing your possessions, without a deduction for depreciation.

      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. According to the National Association of Insurance Commissioners (NAIC) 12 percent of people surveyed did not know the difference between actual cash value and replacement cost; it is a distinction that could represent thousands of dollars to your insurance payout in the event of a disaster.

    • Have you joined a carpool?
      If you are a frequent carpool driver, whether it is to work, or ferrying kids to school and other activities, your liability insurance should reflect the increased risk of additional passengers in the automobile. Check with your agent or representative to make sure your coverage is adequate.

    • Have you retired?
      If you commuted regularly to your job, then in retirement your mileage has likely plummeted. If so, you should report it to your auto insurer as it could significantly lower the cost of your premiums. Furthermore, drivers over the age of 50-55 may get a discount, depending on the insurance company.

As part of your annual review, it is always a good idea to talk with your insurance agent or company representative.

For a related audio file, go to Do You Need to Update Your Insurance Coverage?

For more information on insurance and financial planning for different stages of your life, see the Life Stages tool on the I.I.I. Web site.

The I.I.I. is a nonprofit, communications organization supported by the insurance industry.

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