Rosa and I have heard that it’s a good idea to periodically review our insurance coverage with our agent to confirm that we have the right coverage for our current life situation; things change in our lives and our insurance coverage should reflect those changes. However, we have always been leery of a review of our insurance policies, because we thought it was just an excuse for the agent to pitch more coverage. Rosa and I recently lost the insurance agent who handled our homeowner’s and auto policies to retirement. Our new agent recommended a review of our homeowner’s and auto insurance coverage. Our experience with this new agent convinced us of the value that could be derived from a periodic review of our insurance coverage.
Computer software makes reviews quick and informational
We met with the agent who engaged us in conversation in an attempt to get to know us, our current life situation, and our plans for the future. The agent reviewed both the homeowner’s and auto policies with us. He was able to bring up the policy details on the computer. The monitor was turned at an angle so we could see the information and follow along. The agent experimented with different combinations of coverage and deductibles and updated the premiums as we watched.
Changes in coverage and deductibles results in better value
The homeowner’s policy came under review first. The current coverage exceeded the replacement value of the house by $13,000. The agent suggested we reduce the coverage to match the replacement value of the house and that we also reduce the deductible from 1% to 1/2% of the replacement value of the house. We balked at the reduction in the deductible, because we new it would add to the cost of the policy. The agent ran the numbers, and although there was a slight increase in the premium, it wasn’t enough to keep us from making the adjustments to the deductible that the agent suggested. He pointed out that if we had just one claim within the next 15 years we would come out ahead: we would realize more in savings due to the reduced deductible than we would pay in extra premiums. The odds are good that we will have a claim within the next 15 years; we’ve had three claims for hail damage to our roof in the 30 years we have owned the house. That’s an average of one claim every 10 years.
The agent then suggested we triple our liability coverage. We balked again, but he said it would only make a difference of a few dollars a year to triple the liability coverage. He ran the numbers, and he was correct. The additional liability coverage added less than five dollars to the annual premium. If we had known how little it would have cost to increase our liability coverage for the house, we would have done it years earlier.
We made no changes to our auto policy as a result of the review.
Additional discount lowers overall cost
Once we had settled on the changes to the policies, which added about $26.00 to the annual premium of the homeowner’s policy but did not affect the auto policy, the agent reviewed our discounts. As a result, he discovered a discount for which we were eligible that had not been applied to the homeowner’s and auto policy premiums. The additional discount more than offset the increase in the premium for the homeowner’s policy, and we ended up with a net total reduction of a couple of bucks for the combined annual premiums of the two policies.
Your mileage may vary
Some caveats about reviews of insurance coverage:
- Our agent suggested changes but did not pressure us to make those changes. Be aware that some agents may try to take advantage of a review to pressure you into purchasing coverage you do not need.
- You can always rescind the changes that were made during a review if you don’t feel comfortable with them later on. Your premium will be affected only for the time during which the changes were in effect.
- A review of your insurance coverage may not yield any changes or extra value.
The review of our homeowner’s and automobile insurance policies resulted in better coverage for less cost. That translates into increased value for the money we spend on homeowner’s and automobile insurance. Maximizing value is our goal any time we spend money, so we will continue to request a periodic review of our insurance coverage.
K. C. Knouse is the author of True Prosperity: Your Guide to a Cash-Based Lifestyle, Double-Dome Publications, 224 pages