Is Your Coverage Keeping Up?
Introduction
I have been waiting to use the good old Scout motto in one of these Financial Planning Corners.
For my fellow Eagle Scouts out there, “Be prepared” is one of those phrases that gets carved into your brain early. It is simple, but it carries weight.
Be prepared in the mountains. Be prepared on the road. Be prepared at home. Be prepared when life decides to throw a haymaker.
Where am I going with this???
When the weather gets warmer, people get moving. Road trips, lake days, Adirondack hikes, backyard gatherings, summer storms, boats, bikes, kids running around, maybe even a quick ice cream run on a warm summer night.
Summer brings a lot of fun!
It also brings risk.
That is why June is a perfect time to pull out your personal insurance coverage and make sure the foundation is solid. Because if I asked when the last time was that you reviewed your homeowners, auto, and umbrella policies, and all I heard were summer crickets, this month’s Financial Planning Corner is landing at the right time!
Let’s break it down.
Homeowners Insurance
Start here. Your homeowners policy is not just about the roof over your head. It can cover several important areas:
Protection for your home
Protection for your personal belongings
Liability coverage if someone is injured on your property
Additional living expenses if your home becomes temporarily unlivable
The big thing to review is whether your coverage has kept up with reality. Homes have appreciated, but more importantly, construction costs, labor, and materials have also increased. The key question is not what your home could sell for on Zillow. It is whether your policy would reasonably cover the cost to rebuild it.
Do not assume you are fine because you have “homeowners insurance.”
Pull the declarations page and look at the dwelling coverage. Ask yourself whether that number would reasonably rebuild the home if something major happened. Also review your personal property coverage, especially if you have jewelry, collectibles, firearms, art, equipment, or other valuables that may need to be scheduled separately.
This is not about being paranoid. It is about being squared away.
Auto Insurance
Next, review your auto coverage.
Summer usually means more time on the road. More driving, more trips, more people out and about. That means your auto policy matters.
At a minimum, review:
Liability coverage
Collision coverage
Comprehensive coverage
Uninsured and underinsured motorist coverage
Medical payments or personal injury protection
The liability section is especially important. If you cause an accident and the damages exceed your coverage limits, that shortfall can become a personal financial problem. This is where people can get caught. They have insurance, but not enough insurance.
Do not just focus on the premium. Focus on the protection.
Saving a few dollars per month is not worth leaving your balance sheet exposed.
Umbrella Coverage
This is the big one.
No, this is not the old beat-up golf umbrella sitting in the garage that barely protects you during a summer storm. Umbrella insurance is extra liability coverage that sits above your homeowners and auto policies. It is designed to help protect you if a claim exceeds the liability limits on your underlying policies.
Think of it as a second line of defense.
Someone gets hurt on your property, serious car accident, lawsuit. These are not fun things to think about, but they happen.
A simple gauge is this:
Add up your home and auto liability coverage.
Compare that level of protection to your net worth and overall financial picture.
If your assets have grown, but your liability coverage has stayed the same for years, there may be a gap.
For many families, umbrella coverage can be one of the most cost-effective layers of protection available. You hope you never need it, but if you do, you will be glad it is there.
Helpful Nuggets
Here are a few practical moves to make this month:
Review your liability limits. At a minimum, your liability coverage should be aligned with your net worth and overall exposure.
Consider umbrella coverage. Especially if you have meaningful assets, teenage drivers, rental property, a pool, a boat, or frequent guests at your home.
Check your deductibles. If you have a strong emergency fund, you may be able to increase deductibles and reduce premium costs. Just make sure you can comfortably cover the deductible if needed.
Keep your declaration pages in one place. Homeowners, auto, umbrella, life, disability, long-term care, and health insurance. Make them easy to access.
Review coverage annually. Do not blindly renew. Insurance should be reviewed at least once per year or anytime there is a major life change.
Final Thought
Insurance is not exciting.
It is not the fun part of the financial plan.
But it is one of the pieces that can keep the entire structure from cracking when life gets ugly.
The summer months bring a lot of joy, movement, and adventure. But they also bring real risk. Before you start sending it into summer mode, take a little time to make sure you and your family are properly covered.
Be prepared.
Enjoy the summer!
What I’ve Been Reading:
Insurance Coverage Review Checklist
Helpful article that provides a clear rundown of what to look for when reviewing your homeowners and auto insurance coverage.
Will Tax Rates Ever Really Increase?
Okay, this one is a podcast, but I had to share it. This is by far my favorite financial planning podcast out there. Jeff and Ed, both of whom I highly respect, do a great job breaking down a really interesting topic.
401(k) and 403(b) Savings Rates Reach Record Levels, Despite Uncertain Economy
A little dense, but worth the read. A few stats jumped out. Roth IRAs represented 67% of IRA contributions, and Roth conversion transactions increased 41% year over year. Roth can be a powerful strategy, but only when it actually fits your tax picture, cash flow, timeline, and long-term plan.
That wraps up the June edition of the Financial Planning Corner. I hope you found it helpful!
One quick ask. I’d love your feedback. If there is a topic you would like me to cover, or a question you have been turning over in your own planning, shoot me a note and let me know. And if any of the ideas above connect to your personal situation and you want to go deeper, I am always happy to talk it through.
Yours in Planning,
Pat Kalish, CFP®
