Review Insurance to Ensure Proper Coverage

Life stages can be triggers

If you're a young person just starting out, it may be time to look at renters and perhaps auto insurance. But what about disability insurance? According to Jane Cline, president of the National Association of Insurance Commissioners, Kansas City, Mo., research shows that young people are four times more likely to become disabled than to die. If you're not covered under your parents' health policy or at work, think about catastrophic health insurance. If you buy a house, bundle auto and home insurance for a better rate.

If you're getting married, adjust auto, homeowners, and health insurance coverage to protect you and your spouse. If you're expecting or have children, enroll in family health coverage. Think about life and disability policies in case tragedy should strike.

If you're setting up a household with a domestic partner, know that insurance needs often are different from those of married couples, says Loretta Worters, vice president of the Insurance Information Institute, New York. "If you share a car, for example, you need to make sure one [partner] is the primary driver and the other listed as the secondary driver on the policy," she says. This is important from a disclosure perspective, eliminating uncertainty in case of a loss. Review coverage under home ownership and for personal belongings. Look for auto discounts available for long-term committed relationships. Contact your state's insurance department to find out more about laws in your state.

By the time your family is established, assets likely have grown. Review coverage of personal possessions and replacement values as well as life insurance to cover debts. Make sure you are not overinsured. If children are heading to college, review health, renters, and auto coverage.

When you retire or become a senior, check for homeowners policy discounts. Compare auto policies�premiums may rise for seniors. Your financial portfolio also might indicate that it's time to evaluate annuities.

Lifestyle changes spur reviews

If you're separated or recently divorced, check for coverage gaps and ways to cut costs. "If you are separated and your spouse is paying the insurance bills, provide the insurance company with contact information so you can be notified if your spouse is in arrears," says Worters. "Don't find out after a disaster that your coverage was cancelled for lack of payment."

Remove a former spouse from your auto policy to protect yourself from possible liability if he or she is involved in an accident and is sued. Joint custody of teen drivers triggers a review, and multicar discounts often no longer apply.

Consider life insurance as part of the final divorce decree to cover financial obligations. If the spouse providing alimony and child support dies, this may mean a loss of income. Consider life insurance on the spouse raising the children because, if he or she dies, you will need to finance costly child care. If purchasing life insurance to provide financial protection, consider term coverage rather than whole life. Term is generally cheaper and designed to provide protection for a specific time, for example, until the children reach age 21, says Worters.

If you enter military service, make insurance reviews thorough and regular. Deployments and frequent moves complicate coverage. "Vacancy clauses" in homeowners policies and exclusions on personal property in war zones and military housing can be problem areas, says George Wright, Army spokesman at the Pentagon, Arlington, Va. Service members may want to include Servicemembers' Group Life Insurance in their comprehensive coverage. Talk with a military insurance specialist for more details.

If you are raising grandchildren, that change in your retirement plans prompts a review. Think not only about your needs as a senior, but the health, education, and future financial needs of your grandkids.

If you make major purchases or remodel your home, review coverage. You might want to cover items such as big screen TVs or expensive jewelry with riders�add-ons to your policy. Home additions also need a policy adjustment.

If you install a security system, you may qualify for a premium discount. Check with your insurance agent.

If flash floods, mudslides, or wildfires are possible in your area, check what additional coverage you might want to add to your policy. Cline warns not to wait until you need to file a claim to examine your risks.

Concerns, confusion, and renewal can be prompts

"When your agent tells you about a certain [specific] product, be sure that the product they are trying to sell you is suitable to your insurance needs," says Cline. If the agent doesn't answer all your questions, contact your state insurance department for answers. It's a good source for company and agent licensing data and other information. If your agent isn't able to answer most of your questions, consider switching to a more knowledgeable agent.

When the premium notice arrives, use it as a reminder to shop around. Comparisons are easy to obtain online.

If you don't understand your policy, review it. According to an NAIC survey, only 45% of Americans feel confident making insurance decisions, and more than 60% failed to correctly answer basic questions about insurance coverage, including:

Does auto insurance cover personal property stolen from your car? At what age do most people become eligible for Medicare? Can credit scores affect your auto insurance premium?

Take the survey yourself at NAIC's "Insure U" Web site.

To understand your insurance benefits, educate yourself. "Ask your agent to explain the parts you don't understand," says Cline. "Use sticky notes or write on the policy itself so you get an understanding and the explanation is there when you pull out the policy later."

Published December 20, 2010