Reviewing your insurance document is part of financial planning
What to Include in Your Review
All insurance documents, regardless of the type of coverage, rely on a set of essential elements. Here are the basics that should be available and included in your summary page:
Tips for Reviewing Specific Types of Insurance
Since each insurance document covers a distinct set of needs, each has unique features. These features may not be listed in all forms of insurance coverage or may seem vague, but they will be critical to your understanding of the specific document. Here’s a brief overview of the details you’d want to review for each type of insurance you may have:
Reviewing the Details
Once you have all the basics, you’ll want to look into the details of the document to ensure you have a good understanding of how it works. This includes the claims process, billing, and benefits or payouts. You should also note any limitations that may apply. Reviewing the details can help you identify areas where you may have duplicate coverage, excessive coverage, or areas where you are underinsured.
Tips for Reviewing Specific Types of Insurance
Since each insurance document covers a distinct set of needs, each has unique features. These features may not be listed in all forms of insurance coverage or may seem vague, but they will be critical to your understanding of the specific document. Here’s a brief overview of the details you’d want to review for each type of insurance you may have:
Reviewing Life Insurance Policy
For a life insurance policy, start by tracking the total death benefit. This is the amount that will be paid upon the policyholder’s death. Look for any additional benefits, such as a premium waiver in the event of disability. Some insurance policies have a clause that may allow you to access the death benefit early if you are diagnosed with a chronic illness.
Reviewing Long-Term Care Insurance
Long-term care insurance covers what remains of health insurance and covers items such as the costs of living in an assisted living facility, or home health assistance, or other similar health needs after retirement. You should know the “daily benefit,” which affects the level of care you can afford daily. Long-term care facilities charge fees for housing, food, nurses, and many other items that are added and calculated into a daily rate. Also, see how long the benefit will last. For example, your policy might pay $100 a day for up to 500 days if you qualify for long-term care benefits.
Reviewing Health Insurance Policy
For health insurance, make sure to know your minimum out-of-pocket expenses and maximum out-of-pocket costs (also known as MOOP). The minimum out-of-pocket is the amount you will have to pay yourself before the insurance money starts kicking in. MOOP is a cap on the amount you have to pay out-of-pocket over the year or the entire time period. For example, if the policy has a minimum out-of-pocket limit of $3,000 and a MOOP of $6,000, you’ll want to have $9,000 saved. An emergency fund or health savings account are good ways to save for this purpose. You’ll also want to know what portion of the cost will be covered once insurance starts, and whether there are any deductibles or copayments. You might write something like, “the policy pays 80% of covered services after I pay $50 as a copayment.”
Reviewing
Disability Insurance Policy
For the disability insurance policy, you want to know the amount that will be paid to you each month and the duration of the payments. It is also worth considering how the insurance company defines disability. A policy that pays only if you lose an arm and a leg isn’t very useful for most people. Many disabilities are not of that type.
Review of Property and Liability Insurance Policy
For the property and liability insurance policy, consider the overall coverage and compare it to what you own and your net worth. As your net worth increases, the amount of insurance you have should increase. If someone gets injured on your property and sues you, will your coverage be sufficient? It is helpful to know what items are excluded from coverage. This policy can be complex, as it covers legal actions, so you may want to review it with your insurance agent and adjust the coverage as needed.
Reviewing the Policy After Completion
Once you complete the full review, you will have a better understanding of your security in the event of an accident or incident that leads to a claim. Reviewing policies may not be exciting, but it is part of long-term financial planning.
Source: https://www.thebalancemoney.com/how-to-review-an-insurance-policy-2388605
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