Insurance Review: Protecting What Matters

Insurance is the safety net that protects everything you have worked to build. Yet most people set their coverage once — when they buy a home, start a family, or begin a new job — and rarely revisit it. Life changes, and your insurance should change with it. A marriage, the birth of a child, a home purchase, a career advancement, or even an aging parent can all create new risks that your existing policies may not cover. A periodic insurance review ensures your coverage remains adequate, cost-effective, and aligned with your current financial situation.

Life Insurance: Replacing Your Income

Life insurance serves a clear purpose: to replace the income and financial contributions of a family member who dies. If anyone depends on your income — a spouse, children, aging parents — you need life insurance. The two primary types are term and permanent.

Term Life Insurance

Term policies provide coverage for a specific period (typically 10, 20, or 30 years) at a fixed premium. They are the most cost-effective way to obtain a large death benefit during your highest-need years — when your children are young, your mortgage balance is high, and your savings are still growing. A healthy 35-year-old can typically secure $500,000 of 20-year term coverage for $30 to $50 per month.

Permanent Life Insurance

Whole life, universal life, and variable life policies provide lifelong coverage and accumulate cash value over time. Premiums are significantly higher than term insurance, but the cash value component can serve as a supplemental savings vehicle. Permanent insurance is most appropriate for estate planning purposes (such as funding an irrevocable life insurance trust), providing for a special needs dependent, or as part of a business succession plan.

How Much Life Insurance Do You Need?

A common rule of thumb is 10 to 12 times your annual income, but a more precise calculation should consider:

• Outstanding debts (mortgage, car loans, student loans)
• Future income replacement needs (years until the youngest child is financially independent)
• College funding obligations
• Final expenses (funeral costs, medical bills)
• Existing savings and other life insurance coverage
• Survivor's Social Security benefits

Disability Insurance: Protecting Your Earning Power

Your ability to earn an income is your most valuable financial asset. A 35-year-old earning $75,000 per year who works until age 65 will earn more than $2.25 million over their career — and that does not account for raises. Disability insurance replaces a portion of your income (typically 60 to 70 percent) if an illness or injury prevents you from working.

The Social Security Administration reports that more than one in four 20-year-olds will experience a disability lasting at least 90 days before reaching retirement age. Yet disability insurance is one of the most commonly neglected coverages.

When evaluating disability policies, pay close attention to these features:

• Own-occupation vs. any-occupation: Own-occupation policies pay benefits if you cannot perform the duties of your specific profession. Any-occupation policies only pay if you cannot work in any job for which you are reasonably qualified. Own-occupation coverage is significantly more protective.
• Elimination period: The waiting period (typically 30, 60, 90, or 180 days) before benefits begin. Longer elimination periods result in lower premiums but require more emergency savings to bridge the gap.
• Benefit period: How long benefits are paid — two years, five years, or until age 65. Long benefit periods are critical for protecting against chronic conditions.
• Cost-of-living adjustment (COLA): Increases benefits annually to keep pace with inflation during a long-term claim.

Long-Term Care Insurance

Long-term care insurance covers the cost of assistance with daily living activities — bathing, dressing, eating, transferring, and continence — when you can no longer perform them independently due to aging, illness, or cognitive impairment. Medicare does not cover most long-term care expenses, and Medicaid requires you to spend down nearly all of your assets before qualifying.

The national median cost of a private nursing home room exceeds $80,000 per year, and home health aide services average $20 to $25 per hour. Without insurance, these costs can rapidly deplete a lifetime of savings.

The ideal time to purchase long-term care insurance is in your mid-50s to early 60s — before health conditions make coverage prohibitively expensive or unavailable. Hybrid policies that combine long-term care benefits with life insurance have gained popularity, offering the assurance that premiums are not "wasted" if long-term care is never needed.

Homeowners and Property Insurance

Homeowners insurance protects your home and possessions against damage, theft, and liability. Most mortgage lenders require it, but the default coverage may not be adequate. Review these areas during your insurance check-up:

• Replacement cost vs. actual cash value: Replacement cost coverage pays to rebuild or replace damaged property at current prices. Actual cash value deducts depreciation, potentially leaving you with far less than you need to rebuild.
• Dwelling coverage limits: Ensure your coverage reflects the current cost to rebuild your home, not its market value. Construction costs can differ significantly from real estate values.
• Personal property coverage: Standard policies typically cover personal belongings at 50 to 70 percent of the dwelling coverage amount. High-value items (jewelry, art, collectibles) may need scheduled riders for full protection.
• Flood and earthquake exclusions: Standard homeowners policies do not cover flood or earthquake damage. Separate policies are available through the National Flood Insurance Program (NFIP) and private insurers.
• Liability coverage: If someone is injured on your property, liability coverage pays for their medical expenses and legal costs. The standard $100,000 limit may be insufficient if a serious injury leads to a lawsuit.

Umbrella Insurance

A personal umbrella policy provides additional liability coverage above the limits of your homeowners and auto insurance — typically in increments of $1 million. Umbrella policies are remarkably affordable, often costing just $200 to $400 per year for $1 million of coverage. They are essential for anyone with significant assets to protect, as a single major liability claim can exceed the limits of underlying policies.

Auto Insurance Considerations

Review your auto insurance annually, paying particular attention to liability limits, uninsured/underinsured motorist coverage, and deductible levels. If you have built a substantial emergency fund, increasing your deductible from $250 to $1,000 can reduce premiums meaningfully while still protecting against catastrophic losses.

When to Review Your Insurance

At a minimum, conduct a comprehensive insurance review every two to three years. Additionally, schedule a review after any of these life events:

• Marriage or divorce
• Birth or adoption of a child
• Purchase of a home or significant property
• Major career change or income increase
• Starting a business
• Retirement
• Death of a spouse or family member
• Receipt of an inheritance

Working With Your Financial Advisor

Insurance is not an isolated purchase — it is a component of your broader financial plan. Your life insurance needs diminish as your savings grow and your children become independent. Your disability insurance should coordinate with your emergency fund and other income sources. Your long-term care strategy should integrate with your retirement plan and estate plan. A financial advisor can evaluate your entire risk profile and ensure that your insurance coverage works in harmony with your investments, tax strategy, and estate plan.

Insurance does not prevent bad things from happening. It prevents bad things from becoming financially catastrophic. Review your coverage regularly to ensure you are protected where it matters most.

Take the time to gather all of your current policies, review the coverages and limits, and identify any gaps. The cost of being underinsured when you need it most far exceeds the cost of maintaining proper coverage throughout your life.