Insurance

By: AARP Education & Outreach | April 17, 2006

We all face risks in our daily lives. That's why it's important to have adequate protection so that you and your loved ones don't suffer heavy financial losses.

Insurance is all about protecting you and your money from the costs associated with many of life's routine activities—and some parts of life we'd all rather avoid. Part of creating a sound financial plan is making sure you have all the insurance coverage you need and that you actually need all the coverage you have. If you have any kind of insurance policy, a good place to begin is to read them. If you don't understand them, call your insurance agent (or the insurance company's customer service line) and ask for an explanation.

Basic Questions to Ask
As you review each policy, ask yourself these questions:

• Do I need this policy?
• Is the maximum coverage adequate for my situation? For example, many people find that they never increase the replacement cost coverage on their house, even as the value of the house rises dramatically.
• Am I getting the best value for the premium I'm paying? For example, would I save money and still keep adequate coverage if I raised my deductible (which will lower your premium)? Should I spend a little time searching for the same coverage at a lower price with another insurance company?
• Are there gaps in my coverage? In other words, are there situations that very possibly could occur but that my policy wouldn't cover?
• How much of a discount would I get if I bought all of my policies from the same insurance company (assuming I could get coverage as good as or better than I have now)?
• Does my current insurance agent understand my needs and provide good service? If I don't have an agent, is the insurer's customer service helpful when I need them?

Don't go "claim-happy."
Be careful about filing claims for small issues. Small claims may lead to premium increases or possibly even to having your policy cancelled as too risky for the company to insure. Having a high deductible is one way to stop yourself from filing too many claims.

Take Action

• Look for an insurer in your state for any type of insurance, using an online service from the Insurance Information Institute.
• Be sure that the insurance company offering the policy will be financially sound when, or if, it comes time to pay your claim. Use these services:

A.M. Best
908-439-2200
Moody's Investors Services
212-553-0300
Standard & Poor's Insurance Ratings Service
212-438-2000 

• AARP's Money Matters Tip Sheet on Other Insurance has more information and action steps.

• Get information about your state insurance regulator from the National Association of Insurance Commissioners (NAIC).