No one really enjoys shopping for insurance. So, for most people, once the task is complete, the natural instinct is to toss the policy in a file cabinet and forget about it. When disaster strikes—a car accident, a house fire, a boat collision—you pull it out, call your agent, and expect all your troubles to be solved.
Unfortunately, this “set it and forget it” approach doesn’t fly when it comes to insurance. Whether you have life, health, automobile, homeowners, renters, boat, or business insurance, pull out that thick file once a year to make sure your coverage is still adequate. You’ll want to consider lifestyle changes that took place over the previous 12 months, and even ferret out some cost savings.
“Things change,” says Mark Pizzi, president and chief operating officer at Columbus, Ohio-based Nationwide Insurance. “Most people don’t realize how even minor changes in their daily lives can affect or be affected by their insurance coverage.” Finishing a new basement off in your home, for example, can increase the home’s value and, in turn, affect your homeowner’s insurance coverage. New additions to the family, marriage, and divorce can also influence health, life, and automobile insurance, and should be discussed with your agent if they occur.
Cost Savings Lost
Ignoring your annual insurance checkup may prevent you from saving money. Insurance is a highly competitive industry in which companies are always developing incentives to attract new customers. It’s worth having an annual conversation with your agent to make sure you’re up to speed on offerings. Take the vanishing deductible, for example. Introduced by Nationwide earlier this year, the program drops your deductible $100 for each year of safe driving. Allstate has a similar discount for drivers who have had no accidents or violations in the past five years. These are optional features that the typical customer may not be aware of—unless he or she saw the commercials on television, or talked to an agent.
Ideally, your agent (or agents, if you work with multiple companies) will conduct the annual review and pick up on any discrepancies, changes, or cost-savings opportunities you’re eligible for. If you don’t hear from your agent, pick up the phone and ask for a thorough review.
It’s a simple process but far too many people don’t think about it until they have a claim. That’s when they find out something wasn’t covered. To avoid this trap, educate yourself about your current policy and how to add or remove coverage based on your individual needs.
Joel J. Ohman, a certified financial planner and founder of InsuranceProviders.com in Tampa, Florida, says annual insurance reviews can also ward off “sticker shock” that occurs when that quarterly, biannual, or annual premium invoice arrives. “If you’re confused by the higher rate, ask your agent about it,” says Ohman. “If you’re not satisfied with the reason, start shopping around.”
Taking a proactive approach to your annual insurance review provides peace of mind. The exercise can also save you money—do you really need personal property coverage for that diamond jewelry you sold two years ago?—and prompt you to shop around for better options.
“In any given year, we’ve found that 40% of our customers benefit in some way, adding more coverage, requiring less coverage, etc., from an annual review of their policies,” says Pizzi. “That translates into a significant number of consumers who would win by having their agents spend some time with their policies every 12 months.”