After a year of being stuck at home, spring-cleaning for 2021 promises to be especially gratifying. But while you are clearing out cobwebs and dusting off ceiling fans, remember to look at your insurance policies as well, because they might need a little springtime attention, too.
Whether it is auto insurance, health insurance, life insurance, homeowners insurance, or just a policy that is there to serve as a financial planning tool, springtime is a great time to dig out those old policies to make sure the coverage they offer is serving your family’s needs, and that your paying the right price.
Spring Is the Perfect Time to Focus on Auto Insurance
Springtime is a great time to shop around for auto insurance coverage. Don’t assume that the rates will be the same no matter where you go. Different companies take different things into consideration when they are deciding how much of a risk you present and how much you should pay. Every company takes your driving record into account, as well as demographic data, like your age, sex, and where you live. Others also take your credit score into consideration.
Your rate also depends on what you drive. The more expensive your vehicle, and the costlier it is to fix it if it gets into a wreck, the more your coverage will cost. That is why electric vehicles cost more to insure than internal combustion engines.
If an EV is in a wreck, only a specialized shop would be able to fix it. Most neighborhood mechanics wouldn’t know the first thing to do with an electric motor. And because there are fewer of them, the specialized shops can charge more for their services.
On top of that, there are fewer aftermarket parts for electric vehicles, meaning that any fix would have to be done with the original equipment manufacturer’s parts, which adds to the repair bill.
And if you have a new teenage driver in your house this spring, expect your rate to jump. Teenage drivers are statistically much more likely to get into a wreck than older drivers, and their rates reflect that — often north of 100% more than what you were already paying.
But just because you are paying more doesn’t mean you should put off talking to your insurance company.
You should be thinking about insurance even before they get their learner’s permit. Different policies have different rules governing when they need to be added to your policy. Most automatically cover them at no additional cost when they get their permit, but others require you to call. Then when they get their license, that is when costs typically jump.
You should look at each car you own and add them to the least expensive vehicle to insure. But make sure it is on the newer end of the spectrum, because vehicles older than five years old tend to not have as many safety features and don’t do as well in accidents. Some of the newer vehicles have great features that avoid those accidents in the first place — like backup cameras, dynamic stability control, adaptive cruise control, and automatic collision avoidance.
It is very important to make sure your teen is insured, though, because if your underage driver gets into a wreck, it is your assets that are potentially at risk in a lawsuit. To that end, make sure your liability limits are sufficient, and consider an umbrella policy if you have substantial assets to protect. And make sure to tell junior to keep their grades up, because most insurers offer discounts to good students, as well as ones who take defensive driving courses. Ask your agent about any other potential discounts as well.
Telematics devices make good sense for every driver, not just teenage drivers. They are little sensors that plug into your vehicle’s diagnostics port. They track your driving behaviors, like speed, hard stops, and fast starts. Presuming you don’t drive like a maniac, the company will lower your rates to reflect your good driving habits — often by as much as 30%.
An Extension for Health Insurance Enrollment
The pandemic gave the world a reason to think long and hard about health care. And while health insurance is usually something you think about at the end of the year during open enrollment, there are some great things to check on this spring.
First, if you don’t have insurance, now is the time to take advantage of a Special Enrolment Period the federal government just opened up for Affordable Care Act insurance policies. In a normal year, springtime would be too late to go shopping for a new health insurance policy unless you went through some change of life event, like having a new child, a big move, or a job change.
But President Joe Biden signed an executive order saying that until May 15, anyone who wants one can go to their state health insurance marketplace or to Healthcare.gov and sign up for a new health insurance plan. To make it more enticing, Congress upped the premium subsidy many people get, and they expanded who qualifies for that subsidy as part of the American Rescue Plan, which was passed in March.
In addition to the increased subsidies, if someone has collected unemployment this year, they likely qualify for a $0 premium for an Affordable Care Act policy. Also as part of that American Rescue Plan, they added a major subsidy for COBRA health plans — the plans you could buy from your former employer if you lost your job. Normally COBRA is an incredibly pricy option, but from April until the end of September, the government will pick up the full cost of that coverage, meaning you can keep the insurance at no cost to you.
Even if you already have a health insurance plan, now might be a good time to look at how that plan covers telemedicine. That is because millions of Americans sheltered in their homes rather than tending to their preventative health care needs. So, if you have been reluctant to venture into a physician’s office for fear that you might get exposed to the coronavirus, telemedicine may be a way to tend to your health while still social distancing.
Because of the pandemic, the Centers for Medicare and Medicaid Services loosened the regulations on telemedicine, saying it is now a covered service under federal policies, as long as video capability is available for both the doctor and the patient to communicate.
All the major private health plans also are allowing some manner of telemedicine in all states, though in some states you need to have a video connection for it to be covered. Others allow coverage if all you use is a voice connection.
Getting Back on Track with Life Insurance
Life insurance is a terrific tool to protect your family’s finances in case the worst happens, and a primary earner dies. When you are reevaluating your coverage, or just considering getting a life insurance policy for the first time, the best thing to do is to ask yourself “what would happen to my family if my income disappeared?” Would your family have enough money to pay their bills, or to provide for future needs, like a child’s college fund? Or a wedding?
This is an especially important exercise if you have gone through a major life change. Did you have a new child? Did your child move out or graduate college? Did you recently retire or pay off your mortgage?
Depending on what you might need in the future, your insurance needs will change.
Once you look at how much would be needed in a worst-case scenario, the next thing to consider is what kind of insurance policy to buy. The two main categories of life insurance are term and permeant. Term policies are designed to run for a set period of time — say 25 years. If you outlive those 25 years, the policy expires, and nothing happens, and the insurance company keeps your premiums. If you die during that period, then the policy would pay out the face value to your survivors.
Permanent policies don’t expire, as long as you pay your premium. Because they are designed to pay out eventually, they are much more expensive than term policies, but there are some special cases where a permanent policy makes more sense. Term life is by far the least expensive option, and they are historically inexpensive right now. In most cases, a term life insurance policy makes the most sense for most families.
Getting a life insurance policy during COVID-19 was a challenge. That is because, in order to get the best rate on your life insurance policy, you would need to go through a paramedical health exam. A nurse would come to your house and would check things like height, weight, cholesterol, blood pressure, and other risk factors that might lead to an early death.
During the lockdowns, most of those exams ground to a halt. But, with most of the stay-at-home orders lifted, nurses can now move freely into people’s homes and give these exams again, complete with masks and hand sanitizer, of course.
Homeowners and Renters Insurance for Spring Weather
Your home is your castle, your biggest investment, and the place you spent a whole lot of time over the past year. Shouldn’t you do it a favor and make sure your insurance is protecting it as much as it protects you? Springtime brings with it a host of weather concerns that each have insurance implications.
Spring thunderstorms bring wind and hail. Thankfully, both are covered by a standard homeowners policy. The water they bring with them could be another story. If damage to your home was caused by falling water — say the wind blew your roof off and the water leaked in — your homeowners policy will cover the damage.
But if the water was rising — say your street flooded and it came into your home — then it is up to your separate flood insurance policy to cover you. Flood insurance policies are backed by the federal government and come with generally low premiums, so everyone should get one, regardless of whether you live in a flood zone or not. They are not automatically included in a standard homeowners or renters policy, though, so don’t just assume you are covered.
If lightning sparked a wildfire that damaged your home, that would be covered by a standard homeowners policy, as would the water and slurry firefighters used to douse the blaze, if it also damaged your home or belongings. If any of these hazards damaged your vehicle, it is going to be up to your comprehensive auto policy to protect you.
And don’t think that if you are renting that none of this applies to you. While renters insurance doesn’t cover the structure — that is the landlord’s responsibility — it does cover your possessions, as well as offer important liability protections for you. Regardless of the type of damage you may face, a few spring chores in advance can help you if disaster strikes.
First, everyone should make a home inventory. That is a list from room to room that lays out what you own and an estimate of how much it is worth. You would be surprised how quickly it all adds up. Then, if something happens, you will be able to let the claims adjuster know what needs to be replaced. Adding photos of the rooms, or even a video walk through of each room, greatly helps this process.
Pay attention to anything in your home that is of particularly high value — jewelry, art, instruments, or collectables. Those may need additional riders to be fully covered. Also keep in mind whether your policy covers replacement value or actual cash value. While it seems like that would be very similar, it is a big deal if you have a big loss.
Replacement value covers how much it would cost to buy a new version of what you lost. If you lost your home, replacement value coverage would pay to build it back the way you had it.
Actual cash value policies take everyday wear and tear into account through calculated depreciation.
This means that your older house may not have enough coverage to build it back new, and you may not be able to buy a fancy new computer to replace that five-year-old model that got destroyed. The pandemic sparked many people to move, which is a great reason to sit down with an agent in your new city. Because, while you may have been pretty insurance savvy where you came from, you may not know some of the intricacies of your new hometown.
Is your new town in a hurricane hotspot? Flood insurance is a must. Is it near a fault line? Earthquake coverage may now be necessary. And what about termites? None of these are covered by standard homeowners policies, so getting professional help to show you your blind spots is a terrific idea. Even if you stayed put and opted to renovate instead, you may still need to rethink your policies.
If you are adding a huge master suite, your old policy’s coverage limits may not suffice anymore. Did you add a pool? That may change your liability exposure. And if your contractor got injured while doing the work, it would have been nice to have enough liability protection if you got sued.
Adding solar panels can also raise insurance questions. While solar panels are covered by standard homeowners policies because they are considered a permanent addition to the structure, there are some cases where they may not be covered — like if they were installed on the roof of a detached garage or shed — or if they were ground mounted. In those cases, you may need to include special riders to get them insured.
And if they add value to your house, again, check that your coverage limits account for that new value.
Spring Cleaning for Insurance and Personal Finance
Although insurance is primarily a risk management tool, it can also play into your personal financial planning.
The first way is by making sure all your assets are protected. Homeowners and renters policies have liability protections built in that will protect you if you are sued for just about anything. And auto policies will protect you if you damage something you crash into. But both of those have limits, so if you are sued for a lot of money, you might need some extra protection.
That is what an umbrella policy is designed for. Umbrella policies are relatively inexpensive — often just a couple hundred dollars a year — and they offer you coverage of $1 million or more in liability protection. If you are building your wealth for the future, these make a lot of sense for their relatively low cost.
Another tool for potentially building wealth is a permanent life insurance policy. While the primary tool for building retirement savings is typically a 401(k), permanent life insurance policies can also help you build wealth with some nuanced tax advantages.
As you pay into them, you build a cash value that you can then borrow from yourself. In some situations, that can help you weather market downturns and other challenges while you are retired without raiding your temporarily deflated investments. But you should only think about permanent life insurance once your other retirement funds are well in order.
If you are dabbling in cryptocurrency, you might also be looking for some protection. Cryptocurrency, such as Bitcoin, are computer-based currencies that exists outside governmental structure.
Because they are so unregulated, there are some major risks involved. For example, if you lose your secret code — known as your key — you can lose access to your money with no hope of ever accessing it again. Also, when it comes to cryptocurrency, possession implies ownership — like cash — so if a hacker steals it from you, you are going to be hard pressed to get it back.
Where there is risk, there tends to be insurance. Most of the major insurers so far are not providing cryptocurrency coverage, but many are studying it, and some smaller players are dabbling in offering policies. And some cryptocurrency exchanges are offering some manner of protections, too.
But so far, there aren’t enough available policies to cover all the cryptocurrency in existence, so cryptocurrency insurance is still a relatively fringe financial product.
Insurance Wrap Up: Through Spring and Beyond
With springtime comes a fresh start, and a great opportunity to take stock. Whether it is health insurance, life insurance, homeowners/renters insurance, auto insurance, or insurance serving your family’s financial future, this is a great opportunity to make sure you are covered. And by that same token, if your life situation has changed recently, be especially careful that you have enough coverage to serve your family’s needs.
So, while you are sprucing things up this spring, make sure your financial house is in order, too.