Want to save thousands of dollars over time? Spend one day a year re-evaluating your insurance policies.
At that time, examine your homeowners, auto and life insurance policies to make sure you’re still getting a great deal relative to your coverage levels.
If that sounds dull, imagine a trip to a Caribbean beach you paid for with money you’ve shaved off premiums.
Here’s what you should look for during your annual insurance checkup:
Homeowners insurance: First, make sure you’re adequately covered. Some homeowners make the mistake of covering their house only for the amount they paid. But if you snagged a great deal on your home, you may have bought it for less than the cost to rebuild.
Use a website such as AccuCoverage.com to find the “replacement cost” of your home — which is the cost of reconstructing your house from scratch at today’s prices.
Make sure you have sufficient coverage for your possessions as well. Policies will vary with regard to how much they’ll reimburse for damage to your “chattel personal,” which is industry-speak for “your stuff.” If you own any items of particular value, such as art, antique furniture or jewelry, you may want to buy additional insurance. I once bought insurance to specifically cover a high-performance bicycle.
Auto insurance: Did you finance your car? Many lenders require you to carry comprehensive and collision coverage for the vehicle’s purchase price until your loan is fully paid. Once your car is very old and not worth much, consider dropping comprehensive and collision.
Auto insurance companies are introducing new products and services that reward good driving habits. Progressive, for example, rolled out a Snapshot program in which an electronic device in your car offers a personalized insurance rate based on your driving habits. This service didn’t exist five years ago — and it’s just one example of how insurance companies are rolling out new technologies that could potentially lower your rate.
Life insurance: Perhaps you bought life insurance for yourself or a loved one five years ago. Back then, both you and your spouse worked, you only had one child and your mortgage balance was $150,000.
But in the intervening years, you (or your spouse) left the workforce, causing the family to rely on one income. You had another child. You also bought a larger house, increasing your mortgage balance to $250,000.
You can see why there would be need to adjust your life insurance accordingly. Among other things, make sure your life insurance adequately covers the cost of hiring people to perform tasks that the deceased previously did.
Paula Pant blogs at AffordAnything.com about creating wealth and living life on your own terms. She’s traveled to nearly 30 countries, owns five rental properties and owes her great life to strong money-management principles. Follow Paula on Twitter @AffordAnything.