The most current Nationwide Insurance commercial is hilarious. Its purpose is to point out the importance of understanding your insurance policy. Are you paying to insure a plastic kiddie pool when you think you are insuring an Olympic-sized infinity pool? Does your auto coverage reflect the brand-new Tesla you bought or a 10-year-old used sedan? Do you really know what you are paying for?
Twice the Coverage—Reviewing Your Insurance Policies
To understand your insurance coverage, you need to both read the details in your policy and look at the coverage as it relates to other underlying policies. Take an umbrella policy, for example. Umbrella policies are designed to provide coverage beyond the coverage provided by your auto, homeowner or renter policy at a much higher limit. It protects your assets from unforeseen events, including accidents in which you are held responsible, damages from a lawsuit against you and the payment of legal fees. If you worry about the prospect of losing income or assets due to one large lawsuit, an umbrella policy can be the answer.
As financial advisors, we talk about the need for insurance coverage all the time. But there is a big difference between getting coverage that you currently don’t have and trying to get the biggest bang for the buck for the coverage that you already do have. I decided I would do what I recommend that my clients do: review my current coverage and have a professional review it.
I went home and dug out all of my insurance policies: home, cars, personal articles and umbrella. I gathered both the declarations pages (that first page that summarizes the coverage under each policy) and the policy booklet itself. I scanned it all and asked an insurance consultant to review it.
Insurance policies are like wills: Both need to be reviewed periodically as your life circumstances change. The kids grow up and get their own car insurance and no longer need to be associated with your policies. The cars age, which often prompts a higher deductible or the removal of collision. In looking at my own policies, I took one child off the policy completely; he hates driving, hates cars and has vowed to always live where public transportation is available. The second child now lives in a city and uses a rental when he needs a car. The third is still living at home and is driving regularly, though only locally. With respect to the other insurance policies, I didn’t think much had changed. No new personal articles to cover. We have been living in the same home for 25 years with the same footprint.
So what could a review by an insurance professional show? Well, as it turns out, a lot.
A review of my policies found the following:
- Kids listed as drivers of our cars who no longer live in the area
- The wrong number of cars owned
- A low deductible for a car with 110,000 miles on it
- No glass replacement coverage (auto)
- A gap in coverage of medical benefits (i.e., no coverage between $10,000 and $100,000)
During the review process, I realized that my policies didn’t contain some of the newer features available: worldwide coverage on an excess liability policy, legal defense (again on an excess liability policy) and glass replacement. In total, I could save $1,700 per year with better coverage than I currently have. Sounds like a win to me.