NEW YORK – No one wants to think about insurance unless forced to. But it pays to give your policies a checkup when they come up for renewal. Just as when you first buy a policy on your home, life or car, you need to make sure you have the right amount of coverage at the best price. So what should you look for when updating your policies?
With auto insurance, be certain you factor your car's age and condition into your choice of deductible. You probably want a high deductible on older cars that it won't make sense to fix in the event of a fender bender. Changes in the number of young drivers included in your policy, the distance you commute to work and where you park your car are among the other things that can significantly affect your premiums.
If you are a homeowner, take an inventory of your belongings once a year and adjust your contents coverage accordingly. Look closely for any changes that the insurance company has made in your coverage — you may not notice a subtle difference until after disaster strikes. Remodeling, renovation and major purchases like appliances should be factored into your policy so that they will be covered should something go wrong. And your new electrical system or roof may also qualify you for a discount.
How you update your life insurance depends on what type of policy you have. For term life, do a quick comparison of premiums to see if yours are still competitive, especially if your insurer raises them more than you expected.
For whole life, get rid of riders you no longer need. Pay off any policy loans that are earning less than the interest you are paying on them. If you find you don't need as much coverage as you're paying for, ask your insurer if you can reduce the face amount — known as a partial surrender — but watch out for extra fees.
And don't cash in a policy without considering a 1035 tax-free exchange (think of it as an insurance rollover). That will let you transfer your money to another insurance policy or to an annuity and continue to defer taxes on any gains made within the policy.
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