Do you have too much insurance coverage?

A headline like that will catch my eye every time, but it was especially intriguing because it was in an email from an insurance agent - Eric Chase of our Insurance One affiliate. Now I knew that Eric would also get around to a sales pitch in the email and he did, but still it made sense to read and think about how changes in one’s life need to be factored in to insurance coverage. All to often when big things happen – a job loss or change or maybe some change in the family unit – we all forget to check what the impact of those changes might be on our insurance. Here are the examples that Eric had in his email:

• Auto coverage: Due to the economic downturn, many Americans have lost their jobs. That means they may no longer commute or may have cut down significantly on the number of miles they put on their cars. Lower mileage can translate to lower premiums for some drivers. Talk to your agent about qualifying for a discount if your driving routine has changed.

• Coverage for Collectibles and Valuables: Many people, in need of extra cash, have been forced to sell jewelry, furs, art, antiques and other collectibles and specialty items. Since most of these items require additional coverage beyond the standard homeowners policy, these consumers need to tell their insurers when they no longer own the items so they are not paying for unneeded coverage. Savings could be considerable.

• Home Safety: It is important to note that certain home improvements such as security systems, upgraded wiring, and fire or storm resistant materials can result in insurance discounts. Let your agent know if you have made these types of changes in your home.

• Low Deductibles: The owners of an expensive home need to consider whether a low deductible makes sense. If someone steals the TV, it isn’t going break the bank. Those same consumers need lots of insurance for a total catastrophe, though. Therefore, they may want to take a $1,000 deductible, or even higher, and save 10 to 20%. In fact, increasing deductibles is one of the best and easiest ways for almost anyone to save money on their insurance.

• Insurance discounts: Just ask! They are readily available for consumers who combine family policies, use one insurance company for several types of coverage, or take other measures such as using theft deterrents or maintaining good driving records. This is a main reason why consumers should consult with an independent insurance agent at least once a year to evaluate changing needs and look for cost savings.

• Credit life insurance: As their cash flow declines, many consumers are forced to rely more on their credit cards. However, Trusted Choice® agencies recommend avoiding credit life insurance under any circumstances. These policies, offered by credit card companies and other lenders, extend for the term of the loan and decrease in value over its life. They are designed to protect a third party if for some reason, the consumer dies before the loan is paid off. They provide no protection to beneficiaries, only to the company that offered the credit or loan.

• Specific computer or hi-tech insurance policies: Though this coverage may seem like a good idea with the prevalence of electronic gadgets at home, a standard homeowners policy will cover most basic personal computer and hi-tech equipment. If you have a home with the structure insured for $100,000, you typically have $50,000 of personal property coverage, including computer equipment not used for business. Only people with home-based businesses, laptops used for business outside the home, or elaborate high-end equipment need to consider extra coverage. It’s usually cheaper, and you get better coverage, if you buy an endorsement to the home or home-business policy rather than a separate specific policy.

And here are some things that Eric was thinking about that might leave insurance consumers venerable.

• Home-based businesses: With increased corporate layoffs, millions of Americans are operating full- or part-time businesses from their homes. If you rely on your homeowners policy as your only means of protection, you may find your business underinsured or uninsured in the event of a loss. These policies were never intended to cover business exposures. Consequently, coverage for the items you use in your business such as computers, filing cabinets, tools and inventory are limited to $2,500 in your home and $250 away from home under most policies. Your homeowners coverage provides no liability insurance for your home-based business. IIABA research has shown that at least 60% of in-home entrepreneurs are not properly insured.

• Home remodeling: In the depressed housing market, many homeowners have decided to stay put and make do with upgrades to their current properties. But home renovation can leave people vulnerable to risk. Too few consumers consider increasing their homeowners insurance limits to reflect the increased value of a remodeling job. Most insurance companies require homeowners to insure their home to a minimum of 80% of its replacement value to be eligible for full coverage. If coverage falls below that level and the homeowner experiences a loss, they will be penalized with a partial settlement. In addition, many people don't take basic steps to protect themselves from liability exposure while construction workers are in the home. Unfortunately, it is more common to find shoddy, unqualified, and uninsured contractors in a bad economic climate than when times are good. Consumers should always ask for a certificate of insurance from anyone employed in their home and seek advice from an insurance agent.

• Renters insurance: Those unable to afford homeownership during these uncertain times still have property and valuables they should protect. Renters insurance not only protects the contents of a rented property, but also shields the policyholder from liability. And it’s not expensive (because you’re not insuring the building -- that’s the landlord’s responsibility). A typical policy that offers $15,000 in property protection and $100,000-$300,000 in liability coverage can be as little as $100 a year.

• Your Home’s Value: Although the market value of your home may have decreased significantly in this economic environment, don’t make a quick decision to trim down your homeowners insurance coverage. It is important to remember that your homeowners coverage is not tied to market value, but to replacement cost (the cost of actually replacing or rebuilding the structure if disaster strikes). Construction, labor, and materials costs have remained relatively stable, even in this market. Don’t leave yourself underinsured.

I’m like most of you – I just don’t spend much time thinking about my insurance coverage and what might need to be reviewed or changed. I laugh at the little Geico lizard when he’s on pitching their insurance and I watch the eSurance cartoon characters battling the bad guys in between segments of my news show, but I seldom get up and go check my policies for any of the issue that Eric brings up here. Likely it’s worth the effort. You can reach Eric Chase at (734) 662-0174 to have him help you understand how you might need to change your insurance coverage. It’s not as painful as it might sound and could save you big money.