Keeping Your Coverage Strong: How to Evaluate Insurance Policy Performance

Evaluating the performance of your insurance policies over time is a crucial aspect of responsible financial management. It’s not enough to simply purchase a policy and forget about it. Life changes, your needs evolve, and the insurance market itself fluctuates. Regularly assessing your policies ensures they continue to provide adequate protection at a reasonable cost and remain aligned with your current circumstances. Think of it as an insurance “check-up” to ensure your coverage remains healthy and effective.

Several key areas should be considered when evaluating the ongoing performance of your insurance policies. The first and perhaps most critical area is coverage adequacy. Life is dynamic. Major life events such as marriage, the birth of children, purchasing a home, career changes, or even significant lifestyle shifts can drastically alter your insurance needs. For example, a life insurance policy that was sufficient when you were single might be woefully inadequate once you have a family and mortgage. Similarly, your homeowner’s insurance needs might increase after home renovations or acquiring valuable possessions. To evaluate coverage adequacy, periodically review your current policies in light of your present life situation. Ask yourself:

• Does my coverage still reflect my current assets and liabilities? For example, is your homeowner’s insurance coverage still sufficient to rebuild your home at current construction costs? Is your car insurance liability coverage high enough considering your current income and assets?
• Have my needs changed since I initially purchased the policy? Consider if you need to increase your life insurance coverage due to a growing family or increased debt. Perhaps your health insurance needs have changed if you now have chronic health conditions or different healthcare access.
• Are there any gaps in my coverage? Have you acquired new risks that aren’t adequately addressed by your existing policies? For instance, if you’ve started a home-based business, you might need additional business insurance.

Beyond coverage adequacy, cost-effectiveness is another vital aspect of policy performance. Insurance premiums can change over time, and comparing your current premiums to market rates is essential. To evaluate cost-effectiveness:

• Compare premiums with similar policies from other insurers. Get quotes from multiple insurance companies for comparable coverage levels. Online comparison tools can be helpful, but also consider speaking directly with independent insurance agents who can provide personalized advice and access to a wider range of insurers.
• Assess your deductible levels. Higher deductibles typically result in lower premiums. Evaluate if you’re comfortable increasing your deductibles to potentially reduce your ongoing costs, while ensuring you can still comfortably afford the deductible amount if you need to file a claim.
• Review discounts and potential savings. Insurers often offer discounts for bundling multiple policies (e.g., home and auto), maintaining a good driving record, or installing safety features in your home. Ensure you are taking advantage of all applicable discounts.

Furthermore, consider the claims experience associated with your insurer. While you hopefully won’t need to file claims frequently, the quality of the claims process is a critical indicator of policy performance. If you have made claims in the past:

• Reflect on the ease and efficiency of the claims process. Was the process straightforward? Was the insurer responsive and helpful? Was the claim settled fairly and promptly?
• Consider customer service reputation. Research online reviews and ratings of your insurer, focusing on customer service and claims handling. While individual experiences can vary, consistently negative reviews might be a red flag.

Finally, don’t overlook the financial strength of your insurer. Insurance companies need to be financially stable to reliably pay out claims, especially for long-term policies like life insurance. To assess insurer financial strength:

• Check financial ratings from reputable rating agencies. Agencies like A.M. Best, Standard & Poor’s, Moody’s, and Fitch rate insurers based on their financial health and ability to meet their obligations. Look for insurers with consistently strong ratings.
• Monitor insurer news and financial reports. While not always necessary for routine evaluations, being aware of any significant financial news or changes related to your insurer can be prudent, particularly for long-term policies.

Regularly evaluating your insurance policies – ideally at least annually or whenever significant life changes occur – ensures your coverage remains effective, cost-efficient, and provided by a financially sound insurer. This proactive approach to insurance management provides peace of mind and safeguards your financial well-being.