When Did You Last Review Your Insurance Coverage?

When is the last time you compared rates on your home and auto insurance policies? Unfortunately, a stellar safety record doesn’t always translate into lower insurance rates. Even if you think you have a good rate, shopping around periodically is smart.

After receiving my April newsletter and attempting to follow my advice of maintaining an umbrella insurance policy, one of my readers contacted his insurer to add coverage. This reader was shocked when his insurer informed him that he didn’t qualify for an umbrella policy because he didn’t carry sufficient liability insurance on his auto policy. (Minimum auto liability insurance – frequently $500,000 – is required in order to purchase umbrella coverage.) Although this individual had owned his policy for eight years, he was unaware that the policy only provided $50,000 of liability coverage. This amount was clearly insufficient for an individual approaching and preparing for retirement.

In addition to realizing that he was severely underinsured, this individual discovered he was also paying excessive premiums. For only $50,000 of auto liability coverage, this person was paying $914 per year. Moreover, the individual realized he was paying $351 per year for the $350,000 of liability coverage the individual had on his condo. Consequently, in total, this person was paying $1,265 per year for $50,000 of auto liability and $350,000 of home liability coverage.

This individual then spoke with an independent insurance agent to increase auto liability coverage to an amount that enabled him to obtain an umbrella policy. This was critical, as it dramatically decreased the individual’s liability exposure, a risk an individual with accumulated assets clearly shouldn’t have. Even better, the individual was able to obtain dramatically improved rates on his policies. For a total of $1,207 (less than he was previously paying!), the individual was able to secure $1,000,000 of auto liability coverage, $350,000 of home liability, and an additional $1,000,000 umbrella policy.

Clearly, it can be beneficial to occasionally review and compare rates on your insurance policies. People tend to believe that policies that have been owned for extended periods of time are efficiently priced, but it may be the opposite. If you haven’t verified that you are adequately insured and conducted a cost comparison recently, speak to an independent insurance agent and minimize your exposure with cost-effective policies.

About the author

Lon Jefferies, CFP®, MBA
Lon Jefferies, CFP®, MBA

Lon Jefferies is an investment advisor representative with Net Worth Advisory Group, a fee-only financial planning firm in Salt Lake City, Utah. He is a Certified Financial Planner (CFP®) and a member of the National Association of Personal Financial Advisors (NAPFA). He possesses an MBA and bachelor's degrees in Finance and Marketing from the University of Utah. Lon writes articles for local magazines such as Utah CEO, Business Connect and Utah Business Magazine, and he consistently contributes articles to online magazines such as FIGuide.com and FILife.com (by The Wall Street Journal). Additionally, Lon is an expert author at EzineArticles.com. Lon has been quoted nationally in publications such as the NY Times and Investment News.

Lon can be contacted at (801) 566-0740 or lon@networthadvice.com. Learn more about Net Worth Advisory Group at http://networthadvice.com and visit Lon's blog at http://www.utahfinancialadvisor.blogspot.com.

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