Why Your Insurance Needs a Check-Up
Financial guru Suze Orman stresses that keeping your insurance up to date is super important, especially since natural disasters are happening more often. Even if your house or car gets messed up, you still have to keep paying your insurance bills. Otherwise, you might not be covered when you really need it. Orman says, “Your policy must be ‘in force’ when you are making claims.” This is extra critical for people with mortgages because lenders require active insurance.
Watch Out for Insurance Gaps
Not all insurance policies are created equal. The small print can make a big difference. Homeowners insurance usually has these parts: Coverage A (the house itself), Coverage B (other buildings on your property), Coverage C (your stuff), and Coverage D (if you can’t live in your home). The most important is Coverage A, which determines how much money the insurance company will pay if your house is damaged or destroyed.
Here’s where things get tricky. Many homeowners have Actual Cash Value coverage. This pays out based on how much your home or belongings are worth now, after they’ve lost value from use. If your roof is 15 years old, you’ll only get paid for what it’s worth today, not the cost of a new one. Orman points out, “That’s not good enough as it won’t be enough to cover the current (think about inflation) cost to replace things.” The problem gets worse as repair costs go up.
Inflation’s Impact
According to the U.S. Treasury Department, homeowners insurance costs went up about 8.7% per year between 2018 and 2022, which beat inflation. That’s why Replacement Cost Value coverage is better. It pays you based on today’s prices, so you can afford to rebuild or replace damaged property. Orman suggests checking your policy limits every year because building costs keep going up. She also notes, “There’s typically a dollar limit to the total value of Replacement Cost coverage.”
Some people can get Extended Replacement Cost coverage, which pays 10% to 25% above the policy limit. This is especially smart when natural disasters drive up costs for labor and materials.
Car Insurance Considerations
Car insurance can have similar problems. Many drivers skip comprehensive coverage to save money. But if a storm damages their car or it gets stolen, they won’t get any money back. According to Bankrate, the average cost of full coverage car insurance went up to $2,638 this year, a 12% increase from 2024 because of higher repair costs and more claims.
The National Association of Insurance Commissioners says that about 80% of drivers with insurance have comprehensive coverage. They know it’s important to protect against things like theft, weather damage, and accidents that don’t involve crashing into another car.
Insurance isn’t something you can just set and forget. Since costs are rising, it’s worth reviewing your policy every year to make sure you’re fully covered.
