Reviewing Your Coverage and Making Qualified Mid Year Changes to Insurance Policies

By on June 1, 2018

So many of us choose to stop thinking about our insurance coverage the minute we purchase a policy. Some others may not think about their policies until something happens which requires them to think about their coverage, such as needing to claim damage to a home, getting married or adding a new teen driver.

Unfortunately, if you aren’t regularly reviewing your insurance policies, you could be without proper coverage or paying too much. A good place to start might be a meeting with your agent to do a mid year insurance checkup and discuss potential or necessary changes.

Perform a Mid Year Coverage Audit

Determine whether your insurance policies are keeping pace with the changes in your life and if you are receiving all the coverage and discounts for which you might qualify. The easiest way to organize and review your insurance policies is to create a one page summary for each insurance policy copied from the insurance contract into a word document or spreadsheet. Then sit down with your financial advisor to compare your coverage with your needs and goals.

Homeowners, Boat, RV, Auto and other Property & Liability Coverage

If you bought a new car, RV or boat; or your same old vehicle has gotten on in years, you might not need the same types and amounts of coverage. You still have to meet the state minimum for coverage, but you may need to tweak existing policies. For example, you might want to:

  • Add collision and comprehensive if you bought a valuable car or added a teen driver. Or, you might want to get rid of those coverage types if your car is getting on in years.
  • Add emergency roadside assistance if you or someone on your policy is traveling a lot.
  • Add gap insurance if you just purchased/leased a vehicle or plan to spend the summer using your high-powered watercraft, or drop the coverage if you paid off your loan or sold off your jet-skis.
  • If you’ve remodeled your home or purchased some items of great value, such as jewelry or pieces of art, you may need to modify your homeowners insurance.

If you decide to open a home-operated business you may be able to make minor modifications to your existing policy, however, your homeowners insurance may not cover it. In some instances, you might need business insurance to protect damage to your business’ equipment or visitors on the property for work purposes (under certain circumstances in which risks are minimal, a low-cost rider may be added to your homeowner’s policy to cover a home business’s assets).

In addition, personal insurance brokers may be able to offer you discounts for safe driving, years without claims, using anti-theft tools or for combining all of your policies with one company. Speak with an agent specifically about the discounts available and which ones you might now be eligible for.

Life Insurance

Life insurance helps secure your family’s financial future after the death of you and/or your spouse. It also helps ensure that the estate that you have worked your life to build will be allocated to the beneficiaries you have chosen. Make sure your existing life insurance policy is covering your current needs.

As your life situation changes through the years, so do your insurance needs. Review your life insurance coverage and make any adjustments if you have had a major change in your life — such as a birth, divorce, marriage or even a new mortgage or job — since January. You may need to change your named beneficiary and coverage limits.

Alternatively, your life changes might allow you to lower your life insurance coverage and premiums. For instance, if the mortgage is paid, you’ve retired or your children have ‘left the nest’, your life insurance company might be able to offer “conversion privileges” from your current term life insurance policy to a new whole life insurance policy.

Permanent life insurance policies can help you expand your death benefit and establish an investment vehicle which can be used for cash while you are still living. Ask your insurance agent about these various types of life insurance and if they might be a good option for your financial situation and goals.

If you already have a policy with cash value, track the performance of your investments to be sure you are staying ahead of inflation and/or reaching target returns. You can request an in-force illustration from your insurance company. Speak with your policy manager about options for changing your asset mix and setting target dates for automated portfolio rebalancing.

Making Changes to Health Insurance

Health insurance is a much more complicated coverage to alter outside of designated enrollment periods (varies by plan), however, some life events qualify for changes in your plan choices and coverage levels after the start of the plan year. IRS regulations permit you to make mid-year changes to pre-tax benefits within 30 days of an IRS-approved event.

Examples of Qualifying Life Events (QLE) or Qualifying Status Changes (QSC):

Changes in Personal Life

  • Legal marital status change – marriage, separation, divorce, annulment or death of spouse
  • Domestic Partnership – gain or loss of a domestic partner
  • Number of Dependents – birth, adoption, or death
  • Eligibility of Dependents – dependent loses other group coverage
  • Permanent Residence of the employee, spouse, domestic partner or eligible dependent, which affects plan eligibility (ie. moving out of the service area)

Changes in Coverage Benefits or Cost

  • A sudden increase in your premiums
  • A reduction or loss of your employer group coverage as a result of cutbacks or changes in employment status, (commencement or termination of employment, strike or lockout, unpaid leave, part-time or full-time hours, etc.)
  • Eligibility for other employer group coverage under a spouse/domestic partner’s plan
  • Reduction or loss of your spouse/domestic partner’s health insurance plan benefits
  • Change in eligibility for Medicare or Medicaid

Documenting Qualified Status Changes (QSC)

It is necessary to provide written documentation to substantiate eligibility for, and the effective date of, the requested change. You may need to present the following:

  • Birth Certificate, Marriage Certificate
  • Court documents for adoption or divorce
  • Affidavit of Common Law Marriage
  • Affidavit of Domestic Partnership
  • Employer Statements (information may include name of individual(s) affected by a status change and the effective date or termination date of other benefits
  • Health Insurance Portability and Accountability Act of 1996 (HIPAA) Certificate of Creditable Coverage from prior insurance company

You may need to work with your benefits plan manager and a trusted insurance agent or legal counsel to make these mid year changes in the required timeframe and with proper documentation.

Review Your Coverage Once or Twice Each Year

Make sure your insurance coverage will protect you through all of life’s changes and your financial goals for the future. A mid term review of your insurance policies can identify errors, gaps and inadequacies in current coverage. Remember to speak with your financial, legal or tax professional for more information about the topics which interest you and to determine the benefits and tax implications of altering your protections.

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About Harold Goldman

I am the founder of FinancialSafetyNet.org, and a Retirement Planning and Long-Term Care specialist. I am also the President of Emes Insurance Services, Inc., a Murrieta based insurance agency designed to help people with Retirement Planning and funding for College. I believe in educating my clients to become financially competent in an effort to develop plans for guaranteed income, protection against loss and tax-advantaged growth. To contact me Call (844)-376-2265

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