Marching orders to returning troops: Review your insurance policies

Marcia Frellick

As thousands of members of the U.S. military adjust to life after Iraq, they may want to undo or revise some of their changes they made to their insurance before they were shipped off to the Middle East.

“Without the changes, they are exposing themselves to a lot of risk, and that’s probably not the first thing on their minds as they return from overseas,” says Joe Morrin, senior vice president for financial planning at First Command Financial Services in Fort Worth, Texas.

Experts encourage returning troops to let insurance providers know they’ve returned, update their information and review their policies. It’s also time to reclaim power of attorney if it was transferred before deployment, and to change passwords and PINs associated with financial accounts.

For American troops returning from Iraq, experts recommend a review of auto, home, health and life insurance coverage.

Here’s a checklist of insurance coverage areas to review.

Auto insurance

To cut costs, service members who left cars that wouldn’t be driven may have dropped optional collision and comprehensive coverage and kept only the liability coverage. Be sure to contact your insurance agent or insurance company to see what coverage makes sense for the type of vehicle you drive, its age and the kind of driving you’ll do, says Ron Fredrickson, consumer advocacy manager with the Oregon Insurance Division.

Some choose to crank up the deductible to cut costs while they’re deployed because the risk of filing a claim is lower.

When the car is driven again, the risk returns, so adjust the deductible accordingly after you do the math on how much you could afford to pay in the event of a claim, Fredrickson says. That number may have changed while you were away. With extra deployment pay, you may have built up your savings and now can handle a higher deductible.

It’s a good time to review your budget in general and see how your auto insurance fits in, Morrin says. If you can move from a $250 to a $1,000 deductible, you’ll save on your premiums.

Since an older car will have depreciated further while you were away, it’s also a good time to review whether you need optional collision coverage. The cost for coverage no longer may be worth it. Meanwhile, you should consider whether you have enough liability insurance.

“The state-mandated minimums for most people are inadequate,” says Joseph Montanaro, a financial planner with USAA Financial Planning Services Insurance Agency in San Antonio. “Property damage is a great example — if you were at fault and hit the wrong car, it’s very easy to run right through $25,000 or $50,000 worth of coverage. I think at a minimum you’d want to have at least $100,000 worth of property damage coverage, and it’s relatively inexpensive to get that coverage.”

Home insurance

If someone leaves a home vacant during deployment, he or she may have told the insurer that the home wouldn’t be occupied, so the insurer needs to know the house is being lived in again, says Shane Ostrom, deputy director at the Military Officers Association of America,

Home insurance isn’t designed to cover vacant homes, because the risk of vandalism, fire and water damage is too high. “Also, if they rented out the home while they were deployed, the policy could have been changed to rental insurance and needs to be changed back if the owner returns to live in the home,” Ostrom says. The same holds true if the home was leased or subleased.

It may be wise to review how much protection you have for your home after returning from deployment.

“Sometimes people associate the coverage on their policy with the value of the home. As we’ve seen over the last few years, values have gone down, but that doesn’t necessarily mean building costs have gone down,” Montanaro says.

Don’t assume you can carry less coverage because your home’s appraised value has gone down. And make sure you have enough liability coverage — at least one to two times your net worth, Montanaro says.

Health insurance

Active-duty personnel are covered through the government’s Tricare program. That doesn’t change after deployment or retirement.

“However, reservists who were put on active duty and are now returning to the civilian world do need to make sure as they leave their active tour that they have adequate health insurance — whether through their employer or a commercial policy,” Morrin says.

Also, people transitioning out of the military need to study options to replace Tricare, Montanaro says. They may have a six-month extension of Tricare benefits, but they have to meet certain requirements. The military equivalent of COBRA is available, but it’s expensive — nearly $10,000 a year for a family, according to Montanaro.

Life insurance

Life insurance considerations come into play more if you’re transitioning out of the military, Montanaro says. “Whenever you have a big life event, it’s a great time to determine if you have an adequate amount (of life insurance),” he says.

If you’re exiting the military, it’s likely that you’ll lose your Servicemembers Group Life Insurance coverage; for most military personnel, that amounts to about $400,000 worth of insurance. Montanaro recommends using the life insurance calculator at www.va.gov or talking to your insurance agent to examine your best options.

Kansas Insurance Commissioner Sandy Praeger warns returning military personnel who are looking at changing their life insurance coverage against entering a contract without making sure the insurance agent has explained everything fully and without feeling pressured to sign on the dotted line.