BY:Emmet Pierce
The exercise equipment gathering dust in Americans’ bedrooms and basements is a familiar sign of the way New Year’s resolutions often are quickly abandoned. But a few resolutions you’ll not only want to make but also stick with involve being more prudent about insurance.
That means spending wisely and getting the coverage that matters most. It’s a good idea to start each year by taking stock of your coverage because auto, home, life and other insurance needs change over time — as you move, switch jobs, add to your family, change vehicles and grow older.
When you have to use your insurance, the last thing you want is to learn that you don’t have enough coverage. But you also want to make sure you aren’t carrying more insurance than you really need.
Here are some New Year’s resolutions to help you fine-tune your insurance policies.
Because auto insurance premiums may be tied to how often you drive and to your vehicle model, make certain you’ve alerted your insurer to any changes in driving habits, says Ron Moore, a senior product manager for MetLife Auto & Home.
Consumers should “make sure their policy accurately reflects how their vehicles are used,” he says. “Back when gas prices were low, we wanted to take the big luxury car to work. Now, with gas at $4 per gallon, you’re driving the compact, and that can make a difference.”
Consider dropping collision and comprehensive coverage on older vehicles to save money, he adds. Collision pays the costs of repairing cars following accidents, while comprehensive pays for losses not caused by accidents, such as theft or fire damage. Since your insurance company will repair or replace only up to the value of the vehicle, paying for full coverage on an aging car may not be worth it.
Another great resolution is to drive carefully, says Pete Moraga, spokesman for the Insurance Information Network of California.
“The most important thing that determines what you pay for auto insurance is your driving record,” he says. “Observe the law.”
The start of a new year is a great time to update the inventory of your possessions. You’ll need an accurate list if you ever have to make a home insurance claim.
“You probably have received (holiday) presents, and there are new things in the house,” says Ron Moore, senior product manager with MetLife Auto & Home. “Some of them could be worth a lot: your TV, your stereo, your computers, your clothes.”
If you don’t want to take time to write things down, “a very common way is to make a video recording of your home,” he adds. “If there is a theft, you can go back and say ‘I had this stuff.'”
Consider a special rider to cover expensive items that may exceed the limits of your home policy.
“If you have a big flat-screen TV that costs $1,000, you may want to schedule that separately,” Moore notes. “The cost for a rider is usually pretty cheap. You can make sure your TV is covered for everything, including your 6-year-old kid hitting a ball through it.”
Finally, make sure your home insurance coverage remains high enough if you ever have to repair or rebuild at today’s construction prices.
As you launch into a new year, look for ways to cut life insurance costs, says Debra Newman, who chairs the board for the nonprofit Life and Health Insurance Foundation for Education, or LIFE.
“Have you become healthier?” she asks. “Did you stop smoking? Did you lose a significant amount of weight? Are you off medications? You may now qualify for preferred rates.”
If you’re the family breadwinner, it’s a good idea to make sure a nonworking spouse or domestic partner also has adequate coverage. The main reason for life insurance is to replace lost income, but a homemaker’s work has value, too. “Think about what your partner does in any given month to keep your family functioning,” Newman says. “You would have to replace that expense.”
Kristen Komer, a MetLife vice president, suggests checking A.M. Best Co. ratings or other indicators of your life insurance company’s financial health, to make sure it has the assets to pay your beneficiaries when you die.
“With all the changes that have happened in financial markets, it has never been a more important time to check the financial strength of a company,” Komer says.
Want to trim your health insurance costs in the new year? The best way is to resolve to become more educated and informed about your health care, says Martin Rosen, co-founder of Health Advocate Inc., a company in Plymouth Meeting, Pa., that helps consumers navigate the health care system.
For healthy people who rarely go to the doctor, it may make sense to seek lower premiums through a higher insurance deductible.
“You could be paying a lot of money to get a richer benefit package and you may not use it,” Rosen says. “Most people want to protect themselves against catastrophic medical costs. … People are starting to realize, if they do the numbers, they will save a lot of money and they still will have decent coverage.”
If you have no health insurance, minimal insurance or a high-deductible plan, you may be able to save money by negotiating whenever you receive a medical bill, Rosen adds. The key is to not be shy about asking for a break.
“Ask in a polite way, ‘Is there an opportunity to reduce the bill?'” he says. “Will every doctor or hospital give a discount? No, but some will.”
According to the Federal Emergency Management Agency, or FEMA, 90 percent of major natural disasters in the U.S. involve flooding. Yet many at-risk homeowners choose to roll the dice and skip flood insurance.
With the widespread flood damage from Superstorm Sandy fresh in your mind, you should resolve to buy flood coverage if there is a moderate chance that your home could be damaged by rising waters during a storm. Your homeowners or renters insurance probably doesn’t cover flooding.
Pete Moraga, spokesman for the Insurance Information Network of California, warns that floods can occur in unexpected places. “Sandy came along and proved it.”
Don’t assume federal aid will bail you out after a flood. If you are not in a declared disaster area, you may be on your own for repairs, unless you have flood insurance.
Policies that are available through FEMA’s National Flood Insurance Program will provide up to $250,000 in coverage for the structure of your home and insure the contents for up to $100,000.
California is considered the state most at risk from earthquakes, but there are other regions of the U.S. where damaging shake-ups can occur. Like flooding, earthquakes are not covered by most residential insurance policies. Assessing your need for a special earthquake insurance policy should be high on your list of New Year’s resolutions.
“An earthquake will happen in California, and we are seeing them in other states,” says Pete Moraga, spokesman for the Insurance Information Network of California. “California is the epicenter of earthquake country, but just 11.3 percent of (the state’s) homeowners have earthquake coverage. Businesses have 6.67 percent. When we have another earthquake, who is going to pay?”
A 2011 report from the Congressional Research Service warned about “potentially large losses” from earthquakes due to new development in seismically active areas and the inability of aging structures to withstand quakes.
Moraga worries that efforts to educate homeowners and businesses about the need for earthquake insurance are falling short nationwide. Nearly 75 million people in 39 states are at some risk from earthquakes, according to the U.S. Geological Survey.
