In These Times, an Annual Insurance Check-Up Makes Even More Sense

Financial Planning Association

The pictures coming out of New Orleans in the past few weeks are a reminder that disaster preparedness has many dimensions. While it's a good idea to pre-think evacuation plans, gather important documents in a safe place and make family contact lists, it's also important to check the coverage on every insurance policy you have.

Why? Because when disaster is imminent — as it can be with advance hurricane warnings — insurers will not grant you coverage changes or additions.

Here are points to consider in that process:

Medical deductibles and limits: Property can be replaced. Lives can't. In a disaster, you or your family might need to go to an emergency room. Does your current coverage provide for such out-of-network care? As part of your evacuation plan, you might set aside available funds in an account with a bank that has a nationwide network of ATMs so you can access ready cash wherever you go. Don't rely entirely on credit cards if you don't have to.

Prescription coverage: See what options your health coverage provides you for prescription discounts and prescription-by-mail availability so you can have uninterrupted access to important medications wherever you are.

Homeowner's inventory: If you've been routinely paying your annual premiums without checking coverage for collectibles, home office equipment or additional furniture or assets when you've renovated your home, start making a list of those changes and review them with your agent. Also, take up-to-date photographs or video of all major belongings in your home and keep them in a safe place. While you're at it, send a set to a trusted out-of-state friend and relative.

Home replacement coverage: Go to several providers to estimate how much "guaranteed replacement" or "replacement" coverage costs. With so many homeowners so heavily mortgaged, this coverage is essential.

Flood and earthquake insurance options: If you live in a flood plain or an earthquake zone, chances are you probably already know since that disclosure may be a legal requirement. But review the need for this coverage with your agent because it's not a part of standard homeowners policies.

Disability coverage: Many people get disability coverage through work, but some advisers think you should have separate coverage to supplement inadequate coverage or if you become self-employed or change jobs often. Make sure you have long-term as well as short-term coverage and that the benefits are sufficient to cover living expenses.

Hurricane and windstorm coverage: This coverage varies by state and sometimes by county. Some states offer windstorm coverage pools for people who can't get private insurance through their agents. Residents of some coastal counties can get wind and hail coverage through FAIR (Fair Access to Insurance Requirement) plans, which are high-risk pools run by insurance companies. Your insurance agent or state insurance department will have more details.

Auto insurance: Most comprehensive auto coverage will cover wind, flood or earthquake damage. Could you afford the sudden loss of a working automobile in a disaster? If not, don't cut your coverage. Of course, if your car is totaled, realize your proceeds may not cover the entire cost of a new car.

Business interruption insurance: A good business interruption policy on top of conventional business coverage can cover many business costs up to 12 months. Structure your policy for the best coverage possible, and have all pertinent documentations (including your most recent IRS filing) in your emergency file.

Life coverage: Talk to a number of agents about the appropriateness of coverage that will protect your spouse and children's lifestyle and educational goals. That includes money for ongoing expenses, debt payments and tuition. Working spouses should also consider similar coverage. As painful as it might seem, you might also consider burial coverage for children.

Create a disaster book: Create a disaster section in your binder or folder of information your loved ones would need in case of your death — make sure it's close to the items you would have to grab in a crisis. The tragedy in New Orleans makes a single go-to guide sensible for those who need to access insurance, home and estate information in a crisis. It also makes sense to make a second copy for that relative that has your house photos and videos. In some cases, scanned copies may be stored on a secure Web site or an encryption-coded disk. Your financial planner can help you create this resource.

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October 2005— This column is produced by the Financial Planning Association®, the membership organization for the financial planning community. If you use all or part of this column, please credit FPA® and provide a link to FPA's Web site at

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©2006 Financial Planning Association. All rights reserved.


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