H2 is your full service insurance brokerage. We will happily review you current policy to check for added benefit we can offer and to make sure you are not under uninsured in any area.
Ozier Muhammad/The New York Times
FEW things in our financial lives could be as tedious yet as important as reviewing the policies that insure what we own. Hours spent poring over pages written in arcane language can seem totally wasted. So we don’t do it.
But avoiding the issue does not make it go away. Without going through your policies annually, how will you know if all your assets are actually covered?
“People do not keep their insurance policies up to date with their lifestyles,” said Charles Williamson, president of the private client group at Chartis Insurance, a subsidiary of the American International Group.
Beyond the yearly checkup, he recommends that people seek new bids for all of their nonlife policies every three to four years. “This business changes, and there are opportunities to get more coverage and service, and perhaps save some money,” he said.
Here is a look at what you need to do as part of any financial health review:
AUTO No night of television passes without a barrage of auto insurance ads, all promising to save you money. But while insurance companies try to woo you, their pitches do not always compare apples and apples.
“You can say I saved $100 on my auto insurance, but what did you give up in the exchange?” said Brad Cooper, senior vice president for marketing at InsWeb, an online brokerage. “Any insurance agent can save you money, but they’ll raise the deductible. Can you afford that $1,000 deductible?”
This is where reading the fine print is crucial. Otherwise you could find yourself in a car accident without the means to pay for the repairs.
The other area that needs review is coverage of young drivers. If they are on your policy, they will certainly cause your rates to spike. But discounts are available when your children go away to college and are not driving year-round, so you should check your policy then, said Lisa Lobo, vice president for personal lines at the Hartford Financial Services Group. Likewise, people who drive less because they are working from home could be eligible for discounts.
Uninsured motorist coverage is another thing to check on your policy. It is pretty expensive — a couple of hundred dollars a year for each $1 million in coverage — but that is because it is meant for your protection against someone without insurance who damages your car or injures you. James A. Fiske, national marketing manager for Chubb, noted that in California one in four drivers was uninsured, and in New York that number is one in seven.
HOME Given the drop in home prices in the last two years, many consumers seem to think they can save money by lowering the insured value of their house. If they paid $500,000 for the home and they could sell it now for only $350,000, why not reduce the coverage? That might seem logical, but the cost of rebuilding that house may not have fallen as sharply.
“Sticks and bricks and labor and construction have not dropped,” Mr. Fiske said. “It’s been fairly flat over the past few years.”
Of course, a total loss on a house is a rare occurrence. So it is usually more important to keep upgrades current on your policy. Putting an addition on the house is an obvious time to call your insurer — you have physically added to the size of your home. But if you upgraded your kitchen with granite countertops and high-end appliances, that has changed the value, too, and your insurance company will want to know.
“If the carrier is unaware of the upgrade, that won’t be in the policy,” Ms. Lobo said.
Even if you have not changed anything, newer homeowners’ policies contain innovations. Last year, dozens of Bernard L. Madoff’s victims received payments under a relatively new “fraud safeguard provision” in their Chartis policies. “Some claims were up to $100,000, which is not much with a $15 million loss, but it’s something,” Mr. Williamson said.
PERSONAL PROPERTY While homeowners’ policies cover some of the contents of the home, there are limits. The average homeowner probably thinks $50,000 for contents would be fine, but add in flat-screen televisions, some audio, video and camera equipment, and that limit is hit pretty quickly. Now imagine unique jewelry, expensive watches, a collection of wine or antiques — all those mean it is time to sign up for a valuable personal property policy.
Ms. Lobo said that if an item was worth more than $5,000 it should be added to a personal property policy. “You may not have something that meets that criteria, but there may be extra computers where you could get additional coverage through a basic endorsement,” she said. (An endorsement is any addendum to cover something specific.)
This is also an area of concern with renters’ insurance. A standard renters’ policy has a limit on the value of the contents in the apartment, but that coverage can be increased with a separate policy.
Yet listing valuable items is not a one-time process. First, that list will grow or shrink, and second, the values for these items will go up or down. “I know it’s unusual for the insurance guy to say this, but they may be insured for too much,” said Mr. Fiske. “Or if you haven’t updated this in many, many years you could be dramatically underinsured.”
LIABILITY Do you have insurance to cover you beyond the liability limits on home and auto policies? These so-called umbrella policies are meant to guard against catastrophic occurrences. The coverage is a couple of hundred dollars per million dollars of coverage, but many people are not sure if they need it.
Mr. Williamson said the major factors in determining how much liability coverage to have were lifestyle, net worth and public prominence. Another consideration is where you live. The five areas where lawsuits are most likely to go in the plaintiffs’ favor are South Florida, West Virginia, greater Chicago, New Jersey and New Mexico, according to the American Tort Reform Association.
For less prominent people, other contributing factors include having young, driving-age children and entertaining in the home. The reason is that parents are held responsible for their children if they injure someone, and a guest who drinks too much at your party and crashes his car into someone else could also be your responsibility.
Mr. Fiske said a liability claim for a run-of-the-mill car accident where someone was injured would be $300,000 to $500,000 but could quickly hit $1 million. He tells the story of a young driver who went out for fast food before his parents woke up. Another driver hit him, causing the young driver’s car to careen into a nurse, severely injuring her. Even though the crash was not the young driver’s fault, the nurse went after his parents to pay for her medical costs and lost wages.
The bottom line is you need an insurance checkup annually. Whether you are going directly to an agent or through a broker, your premium contributes to their pay. “The consumer should demand a review every year,” Mr. Fiske said. “You should set the expectation that you should be serviced for that.”