Here’s one of the core things we help our clients with. Understanding
how to minimize personal economic dangers via insurance coverage. For
example, the sudden death of a close relative can have a significant
negative impact on your family’s financial well being. Having adequate
life insurance can help address this. Your home might catch fire.
Adequate homeowners insurance offers critical protection. And of course
having appropriate auto insurance protects you from a loss in case your
car is totaled.
It’s important to have insurance to protect against all of these
different threats. But there is a cost to being over-insured… and not
just in having a higher insurance premium. So here are a few tips to
help you keep this from taking place.
Car insurance.
Having appropriate liability insurance on all your vehicles is
critical. However, having collision and/or comprehensive insurance on a
vehicle with a low resale value that’s also paid off isn’t helpful.
Here’s a way you can test your need. If your car was in an accident
could you afford to replace it without negatively impacting your
finances? If yes, scrap the unnecessary coverage and pocket the savings.
Homeowners insurance policy.
Do you know how much it will cost to rebuild your home if it were to
face devastation? This isn’t the same as what your home might be worth
if you sold it tomorrow. Remember that the cost of land doesn’t factor
into having adequate home insurance protection.
When you buy insurance for your home or condo, you are seeking the
needed coverage in case the house (or a part of it) has to be replaced.
This should be 1-for-1. For example, if you have a home that is
carpeted, you wouldn’t pay for insurance that would replace the carpets
with hardwood floors. When insurance is called upon, the coverage must
be like-for-like. Making certain you have appropriate coverage can lower
your total premiums.
Life insurance.
One of the biggest areas where folks are often over-insured is life
insurance. Some folks view having a life insurance policy from a pride
perspective. But do you really need a $1,000,000 policy? Carefully
reviewing your needs is critical to avoid spending too much on life
insurance. Having the right mix of insurance including term vs. whole
can also offer savings.
Another thing to watch out for is costly riders. While there are too
many to cover in detail here, riders add costs. It’s important to make
certain that whatever riders you choose, they meet your unique needs.
Final Thoughts.
For the most part, being over-insured drives up the cost of premiums
while offering you little genuine benefit. Eliminating these costs can
help you save hundreds of dollars (or more) each year. Shifting these
savings towards other goals such as investing can help you build
financial security. This can include setting aside for college or
retirement.
The best time to address insurance is when life circumstances change.
Recently married? Having a child? Perhaps you’ve just received a big
promotion? You may have won the lottery. Leverage these big life moments
to be 100% certain you have adequate protection. As we review these
life changes with you we’ll help you understand cost-savings
opportunities. This includes making sure you avoid being over-insured.
Contact us today for a complete review of your risk profile and
insurance requirements.