Smart insurance moves for empty-nesters

by Center for Personal Finance editors

NEW YORK (10/3/06)--When is the best time to review your insurance coverage? Don't think dates, think lifestyle changes--such as right after all your kids have left the house, right before you retire, or when you're downsizing to a smaller house (MSNMoney.com Sept. 26).

As you get older and your household shrinks, a lot of things change. Do a careful analysis and take advantage of ways to save money:

Tell your agent the kids are gone. Take them off the auto insurance policy, or ask about distant-student credits if they're enrolled as full-time students and left the car with you.

Ask for an age discount. If you're between the ages of 55 and 70 and have a safe driving record, you usually can get more discounts. And let your agent know if you're no longer commuting and not racking up as many miles every day.

Check your homeowners policy before you travel. Make sure you have replacement value if anything is lost or stolen. Set up riders to cover the value of pricey items such as jewelry, antiques, furs or collectibles. Know what your policy does and doesn't cover; for example, what if you're away from home and your pipes freeze?

Do you need an umbrella? Typically, your assets grow as you grow older, and you have more to lose if you're faced with a liability claim. Consider an umbrella homeowners insurance policy of, say, $1 million to $5 million, with an annual premium in the hundreds depending on where you live and the value of your assets.

Give your health insurance a check-up. Is your current selection right for your changing lifestyle? Will you be traveling outside the country? Will your Medicare supplement cover you in multiple states? Make sure you have access to quality medical care wherever life takes you.

Don't let health insurance lapse. Even a brief break in coverage can wreak havoc with your finances if the lapse triggers a nasty pre-existing condition exclusion, making it harder to get another policy.

Do your homework on health insurance discount cards. Check the reputation and legitimacy of each program by calling your state's insurance department, office of consumer affairs or attorney general's office.

Cancel unneeded coverage. Some disability policies require you to be disabled from work. If you're not working, do you need it?

Investigate long-term care coverage. Many people start thinking about long-term care in their early 50s. Experts advise that you understand what each policy does and doesn't cover so you choose the one that includes the options you need. For example, you may buy a policy thinking you'll have access to home care after a medical emergency, but not every policy covers those costs. Find an agent who understands the nuances of long-term care policies.

Do due diligence. If you change insurance companies, shop around (Insurance Information Institute via Federal Consumer Information Center). Check out insurers' financial health with rating companies such as A.M. Best (ambest.com) and Standard & Poor's (standardandpoors.com).