Now that your 2021 income taxes are hopefully behind you, let’s turn to your insurance- in particular property and casualty insurance. It’s important to review your policies annually to make sure your coverage is appropriate and the best price. These days there are some additional compelling reasons:
- Rebuilding costs of homes are substantially increasing,
- The 2022 hurricane season is upon those of us in the Southeast.
- Life changes and your current policy may not reflect these changes.
- Many Americans have seen really nice increases in their net worth in the last three years.
Let’s first look at coverage for your home. Many of you have been pleased with the increase in value in your home. The question is whether your current insurance policy has the right value to cover the potential replacement or repair of the house. Material goods for residential construction are up 19% over last year. Asphalt roofing materials are up 16%. Lumber is up 6%. Labor costs are up, with roughly 400,000 job openings still in the construction industry. All of these elements add to the cost of replacing or repairing your house if damaged. You need to have appropriate coverage on your house, in case you need to rebuild it.
Second, let’s look at loss from weather events. In 2021, there were 20 separate events producing $1 billion or more in losses. 2021 set an all-time record with $47 billion of weather disasters-nearly 1 in 10 houses were impacted. Natural disasters are on the rise-there were 39 “natural disasters” in 1960 and 396 in 2019. Again, do you have appropriate coverage and what are your deductibles?
Third, let’s look at life-changing events for insurance purposes. Here are some examples:
- Changes in your living situation- moving, selling a property, even remodeling or renting out the property merit an insurance review of all of your coverages.
- A change in family size- up or down.
- Childhood milestones- when a child graduates from school or turns 16 and starts driving, it’s time to check your insurance.
- Retirement and other milestones. If you retire and no longer commute to work or simply work remotely, or downsize your home, an insurance review can help adjust your coverage and your cost.
Fourth, even with a downturn in the markets in early 2022, your net worth today may be significantly larger than it was a few years ago. In addition to the basic coverage for your assets, you may need to obtain or increase your “umbrella” insurance policy. This is an extra insurance that provides protection beyond existing limits and coverages of other policies. This is particularly relevant in the areas of injuries, property damage, certain lawsuits and personal liability situations. In our ever increasingly litigious society, you need to protect your net worth and an appropriate umbrella policy can help.
An insurance review is a thorough look at your insurance coverage- the policies protecting your home, vehicles, family members and other valuables. You need an insurance agent and it doesn’t hurt to have two agents to review your coverage. Total wealth management firms like DWM don’t sell insurance but know insurance and can help provide a trusted independent agent or two to review your circumstances. Typically, there is no cost for a review. A review is designed to provide recommendations to improve coverage and possibly reduce cost. But, even if the review only concludes that your coverage is the most appropriate and at the best cost, you have received value from the process-in the peace of mind it can provide.
In this blog, we have been focusing on property and casualty. In addition, it also important to review your coverage for your life, disability, health and long-term care coverage. We’ll provide some additional input on those in the future.
If you are ready to do an insurance review and don’t know where to start, call DWM. We’d be happy to help. Our goal is to help you protect and grow your assets and proper insurance coverage is a key component of meeting that important objective.