As a Financial Advisor, one of the things that I see frequently by my clients and prospective clients is the lack of focus on home and auto insurance, also called property and casualty insurance (P&C for short). Most have been with the same company several years and since the payments are included in a mortgage payment or on autopayment they tend not to take a look at either cost or the benefits they are being provided.
We recommend to at least review the coverage once per year with us or their agent to make sure they have adequate coverage for the right price. The reason we recommend this is as follows:
My wife and I just got our renewal notice for our auto insurance. When I looked at it something didn’t make sense. Our current payment was $3,809 per year but in February it was going up to $6,648 per year. That is an increase of 74.53%!! Completely outrageous. So, I called my agent and they did some digging – it seems that Delaware decided to add a speeding ticket to my record from 2016 that they didn’t report in the previous renewal cycle. But as my agent continued to dig and ask me some questions, she was able to reduce my payment to $2,882, which is a significant savings from where I currently am at. She was also able to add some benefits and coverage that I didn’t have. One 10-minute phone call saved me $3,766 per year! For someone on a tight budget, saving $300+ per month could go a long way towards funding retirement plans, 529s or even having a touch more fun.
Here are some things to consider when looking at your Property and Casualty Insurance:
When was the last time you actually spoke to your insurance company? This should be done at a minimum every two years.
- Know what has changed over since the last time you spoke to your agent/broker.
- Did you make home improvements?
- Did you add a security system?
- Did you complete a defensive driving course?
- Did you buy some expensive art or jewelry that needs to be covered?
- Is your insurance with a captive agent or a broker? As an independent advisor, I tend to prefer the broker approach assuming the following:
- That they are company neutral from a compensation perspective. Note – you should always ask this question of your insurance agent/broker before making a change or changing coverage.
- That they do some sort of analysis of your P&C prior to making any recommendations to see what your true needs are.
- They have more than a few companies that they can work with.
- Their sole business is property and casualty insurance.
- Use the declaration pages to see what type of coverages you have.
- Check to see if you plan is covering replacement cost or actual cost.
- Review what is not covered – ex. Flood insurance.
- Do you have a liability umbrella policy? This policy is a great way to add additional coverage to your home(s), vehicles, rental properties, and any toys (like boats or ATVs). Think of it as an umbrella on top of all of the things you own with additional liability protection. Most insurance carriers have the authority to offer up to $2 Million in coverage.
- Do you have a swimming pool?
- Do you have a dog?
- Do you have kids who drive?
- Do you have kids who spend time at your house?
- Do you have a sidewalk that you are responsible for?
All of these things increase your exposure to lawsuits. In this litigious world, a few hundred dollars extra per year, can provide you peace of mind, and substantially increased liability coverage
These are just a few examples of what you can do to mitigate costs and make sure that you have the right coverage for your family. Lucky for my clients we have experts in house that will do the due diligence and review policies as part of our client service model.