If You’re Not Reviewing Your Insurance Policies Annually, You Could Be Throwing Away Thousands

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Most Americans probably view reviewing their various insurance policies right up there with getting a physical or making a budget.

But like physicals and budgeting, an annual review of insurance policies can save a lot of grief and money.

Here are some tips on how to identify potential savings and shortfalls in your insurance policies.

Auto Insurance

With auto insurance rising at alarming rates — more than 20% in a year as of June 2024, according to NPR. This is a good place to start reviewing your insurance coverage for potential saving opportunities.

To begin with, ask yourself these questions:

• Can I raise my deductible?
• Am I driving fewer miles per month?
• Are my children still at home and driving my car?
• Is my car worth less than I owe?
• Do I still need collision or comprehensive insurance?

If you feel comfortable with raising your deductible, which is the amount you pay out of pocket before your insurance kicks in, it could save you a decent chunk of change.

According to the Insurance Information Institute (III), you could reduce your collision and comprehensive coverage cost by 15% to 30% by raising your deductible from $200 to $500. Raise it to $1,000 and you could save 40% or more.

Other areas to think about are installing anti-theft devices, taking defensive driving courses and similar options for available discounts. If your car is now worth less than you owe on it, you should think about dropping your gap insurance.

Finally, don’t forget to shop around for better deals at competing insurance companies. It’s a hassle, but it can really pay off.

For instance, according to a Consumer Reports 2024 auto insurance survey, of those who switched policies in the past five years, the median annual savings was $461.

Homeowners Insurance

When it comes to your homeowners insurance, there are two main reasons it’s important to review it each year.

One is to ensure you have enough coverage, so that if something does happen, you don’t lose hundreds or thousands of dollars in reimbursements. Second, it’s important to ensure you are receiving every discount you are eligible for.

So, start by asking:

• Is my home worth more now?
• Did I make substantial renovations or improvements?
• Did I start a home-based business?
• Have the terms of my policy changed?
• Did I install new security systems?

To start with, you want to make sure that your policy will cover the replacement cost of your home and possessions if disaster visits. With inflation and the higher cost of building supplies, it’s a vital question.

Similarly, the rise in housing costs might have made your home substantially more valuable. That’s great, but make sure your policy has kept up.

If you have made substantial renovations that have increased the value of your home, make sure you alert your carrier. The same goes for a home-based business, especially if you are seeing clients and are taking on more liability.

When it comes to discounts, perhaps a new security system will net you some savings. According to III, some insurers will provide a 5% discount for smoke detectors, burglar alarm or dead-bolt locks, and up to 20% for a sophisticated sprinkler system and a fire and burglar alarm that rings at the police, fire or other station.

Raising your deductible from $500 to $1,000 could also save you up to 25% with some companies, III said.

Health Insurance

If you are one of 153 million Americans who get their health insurance through an employer, you’ve likely seen costs rise significantly. In fact, as of 2023, the average premium for family coverage has increased by 22%, according to KFF (formerly the Kaiser Family Foundation).

And granted, your ability to lower your contribution costs are limited, but here are some questions to ask:

• How often did I go to the doctor last year?
• Do I see specialists?
• Can I raise my deductible?
• Am I planning to stop smoking or get in better shape?
• Does my plan have my desired in-network doctors and care facilities?

It’s important that you check your plan’s in-network list of doctors, clinics and hospitals. And that means checking them for any potential issues you might have, now or in the future.

For instance, if you live very close to a hospital emergency room, make sure it’s in your plan’s network. The same goes for any specialists you think you might need to see in the next year.

Make sure you check for and take advantage of any preventative care benefits open to you, such as mammograms, colorectal cancer screenings, vaccines and others. These not only can improve or save your life, they can prevent large medical bills in the future. 

If you participate in a Flexible Spending Account, in which you set aside tax-free money to spend on medical costs, make sure you spend it by year’s end. Most require you to do so, or you forfeit the money — pretty much the polar opposite of saving money.

And if you plan to make lifestyle or health changes, like stopping smoking or drinking or joining a gym, check to see if your insurance company has discounts or paid programs to help.

The Bottom Line

Life can get complicated and filled with risk, both financial and medical. It’s why we have insurance in the first place.

An annual review of your policies can ensure your insurance is worth every penny — and doesn’t cost you a penny more.

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