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Why is an end-of-year review of your insurance policies so crucial? Take life insurance, for example: You need to make sure your policy will live as long as you do.
If you’re like most busy Americans, you don’t think much about your insurance coverage on your home, car or yourself very often. But as 2012 winds down, some insurance costs are going up — unless you lock them in now. Think of the end of the year as a good opportunity to look at your policies and make sure you’re getting the most bang for your buck.
“Overall, every insurance policy you have should be reviewed every year,” said Billy Van Jura, an independent insurance brokerin Poughkeepsie, NY.
Once you’ve taken a look at your policies, you can start 2013 knowing that you have the best rates and the best coverage possible.
Insurance documents don’t make for light reading, but we’ve made it easy for you by compiling a list of the specifics you should be looking for as you go over your policies.
First things first: “It’s important to verify your beneficiaries,” said James H. Heafner, registered investment advisor representative at Heafner Financial Solutions, Inc, Income, Retirement & Estate Planning in Charlotte, NC.
Make sure you’ve made any necessary changes based on marital status, new children, etc. Then make sure the policy you have is the right one for you.
Heafner said you have several options for life insurance: term, universal, variable universal, variable life and whole life.
“If you own anything other than term or whole life, you want to give your policy a physical before the year is up,” he said. “Ask your insurance company to send you a breakdown showing how long your policy will last and what will happen to your cash value if the worst happens and if the economy doesn’t improve.”
Most policies offer a view at the “guaranteed value,” which Heafner said details the worst-case financial performance scenario. Knowing whether your account is tanking can help save your cash value before it is consumed or allow you to purchase another policy while you are insurable and before getting any older.
You can also expect a look at what’s called the current value.
“That shows interest rates continuing at their current value,” Heafner said.
And if you don’t have life insurance, purchase a policy before the clock strikes midnight on New Year’s Eve. Why the rush? New regulations that go into effect January 1, 2013, will see premiums rise, said Joseph S. Lucey, president of Secured Retirement Advisors in St. Louis Park, MN.
“Life insurance companies will need to start complying with a regulatory requirement that will raise for most new permanent life insurance policies of 8 to 30%,” he said. “Existing policies issued on or after January 1 need to be compliant with the new regulation and will see increased premiums.”
If you’re a homeowner, check into whether you need increased coverage — even if the value of your home slipped because of the economy‘s poor performance.
“The cost to rebuild it has likely gone up, which means you need more coverage to avoid paying hefty out-of-pocket expenses in the event of a major claim,” Van Jura said.
That’s why you need to make sure your agent or insurance company did an evaluation of projected rebuild and replacement costs in 2012.
And make sure your insurance company takes notice of any improvements you’ve done.
“An updated roof or furnace might mean you need more insurance,” Van Jura said. “But those things can also net you a discount because they reduce the odds you’ll need to file a claim.”
Why review your coverage now? “If you have a mortgage and pay your insurance through an escrow account, your escrow is recalculated at the end of the year,” Van Jura said. So if your premium goes up based on the increase in coverage, you can build the increase into your 2013 budget.
Drivers can get numerous discounts–from good driving and no claims discounts to those based on education and driving habits. Some carriers even offer discounts for paying premiums up front rather than monthly.
Look now to see what discounts you might be missing out on. And plan ahead: “Will you have a teenager getting a license next year? Ask your agent what you can do to keep costs down,” Van Jura said.
To make the most of comparison shopping, he suggests getting quotes from three or four insurance companies or agents.
“Get quotes based on the same coverage to be able to do an apples-to-apples analysis of cost,” he said. Then if a recommendation comes for changing your deductible, adding or dropping coverage, you can accurately assess the proposed changes. Usually if a carrier offers some extra level of coverage, the agent should be able to detail that for you to help you make your decisions.
“While it’s important to be open to coverage suggestions offered by agents, make sure to ask why a coverage change is recommended,” Van Jura said.
LearnVest is the leading lifestyle and personal finance website for women.