Rachel Cruze: 10 Ways Your Insurance Coverage Might Fall Short

©Rachel Cruze

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With major disasters recently getting national news coverage across the country, insurance is on a lot of people’s minds — though home insurance is just one of the types to consider.

If you’re letting your various insurances, from life insurance to car insurance, run on autopilot, you might not be as well covered as you think. Or, on the contrary, you might be unnecessarily overinsured.

Finance expert Rachel Cruze offered 10 circumstances when you should reassess your insurance coverage to see if it falls short or if you have more than you need. 

To help her viewers assess their coverage, Cruze walked her viewers through four main types of insurance and the various circumstances under which you might need to reassess your coverage.

Life Insurance

Life insurance is a type of insurance that doesn’t benefit the holder directly, but provides financial security to your loved ones after death, particularly those who depend upon your income or support.

• Term life insurance: This type is the most affordable and covers a specific set period, say 30 years. Cruze described it as inexpensive and “just what you need.” You might not need to start holding this type of insurance until later in life, but you will need it if there’s even one person who relies on you in your life.
• Whole life insurance: This is a more expensive type of life insurance that acts like an investment, because the money you pay into it grows over time. Cruze does not feel it’s a necessary type of life insurance, though you’re welcome to hold it if you feel you need it.

When To Reassess:

Remember, you really only need life insurance if someone who survives your death is dependent upon your income. Thus, you may need to reassess your life insurance under the following circumstances.

• Marriage: If you get married and your spouse will need to maintain the lifestyle that you both live thanks to your part of the income, you will want to add or increase life insurance.
• Children: Dependents need financial security. If you birth, adopt or otherwise obtain guardianship for a child, you may need to change your life insurance.
• Divorce: If you get divorced, be sure to remove the nonbeneficiary spouse from your insurance, if that’s your situation. Either way, it’s a time to reassess your financial picture.
• Income Increase: If your income increases, you want to change your insurance policy, because ideally your coverage should reflect 10 to 12 times your annual income, Cruze said. 

Home Insurance

Home insurance covers everything from damages to your home from accident, disaster and other wear and tear to the items within your house. 

When To Reassess:

• Renting versus owning: If you are renting and hold renter’s insurance and then buy a home, you’re going to need to transition to homeowners insurance. Or, vice versa if you move from owning to renting. Most importantly, make sure you’re always insured. 
• Private mortgage insurance: If you buy a home but are unable to put 20% down, you may have to obtain private mortgage insurance (PMI). This is essentially just insurance that reassures the bank that you will pay back your loan. Once you reach 20% equity, you can remove PMI and save money.

Car Insurance

Car insurancecovers vehicle-related expenses related to accidents and unexpected events if you own a car. Even if the car you drive is “a beater,” Cruze said most states have a minimum requirement of liability insurance. 

When To Reassess:

• Upgrading to a new car: If you buy a new car, especially a more expensive car than the one you had before, you will most likely need a different level of coverage, or your same coverage could change in price.
• Downgrading to a used car: Similarly, if you were to downgrade to a used car, your premium may drop in price.
• State requirements: If you move to a new state, you’ll need to find out the laws for minimum coverage.

Identity Theft Insurance

While the average person might not have considered identity theft insurance, Cruze said this is more important than ever in our digital age, where all of your information is out there and available on the internet.

Should your identity be stolen, it is very costly and time consuming to untangle this, and identity theft insurance, which is inexpensive, provides you the support of a team of professionals to help you make the process that much smoother. 

• When To Reassess: Don’t wait for your identity to get stolen to protect yourself. If you have any digital footprint — and who doesn’t — the time is now.

Reassessing insurance helps you balance protection and cost. Moreover, Cruze pointed out, you might be able to save a lot of money by downgrading coverage you don’t need.

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