Update Your Insurance Coverage – Cautionary Tales

Many people purchase insurance and forget about it until there’s a loss.  It’s easy to buy a policy online and set up automatic payments.  Then, you get an email from the insurer once every six months that your policy will renew automatically, and let it occur without giving it a second thought.  Setting your insurance coverage on “autopilot” can have benefits, like reducing the chance the policy lapses.

But there can be an important downside to allowing your insurance coverage to renew automatically.  Often, important changes need to be reflected in your insurance coverage.  This might include:

• Moving to a new home;
• Renting out space to tenants;
• Buying a new car;
• Getting married or divorced;
• Having children;
• or other life changes.

When you allow your old policy to renew, you’re not accounting for any changed circumstances since you purchased the policy.  And since you’ve already set the policy to “autopilot,” and renewals might occur months after the big change, you might never give it a second thought.

The important thing to remember is that you only have the coverage you buy.  If a change in circumstances makes your existing coverage inadequate, or gives the insurer a new basis to deny claims, the insurer will typically jump on the fact you never asked them to amend the policy or told them about the change.

This happens more often than you might think, and once there’s been a loss, it’s often too late to go back and make the change.  I’ve encountered many, many people who did the responsible thing, maintained insurance coverage, thought they did everything right, and wound up without coverage for a destroyed home or totaled car because they relied on obsolete coverage from a policy they purchased years ago.  Dealing with insurance claims is tough enough without giving the insurer additional reasons to limit coverage.

The next time your insurer sends you an email saying “your policy is renewing, you don’t need to do anything,” take sixty seconds to glance at your coverage and consider whether it’s up to date.  If not, consider updating your coverage, and remember to notify your insurer of any changes in writing: if it’s not on paper, it never happened.