GETTING AN ANNUAL INSURANCE REVIEW: Aligning Your Policies with Your Financial Goals
Insurance is an essential pillar of a sound financial plan, but coverage that was appropriate a year ago may not make sense for your current situation. Shifts in family dynamics, asset values, and financial priorities mean that a routine review of your insurance strategies is critical—it is a tool that can help you feel financially secure today and hopefully well into the future. This guide highlights the benefits of reviewing Life, Property and Casualty, and Long-Term Care (LTC) insurance policies, and how aligning them with your broader financial strategy has the potential to enhance your overall financial security.
The Value of an Annual Insurance Review
Financial plans evolve, and insurance policies should too. Regularly reviewing your insurance at renewal can help you maintain an optimal balance between protection and cost. It also allows you to identify opportunities to integrate your insurance strategy with other financial objectives, such as wealth preservation, tax diversification, and estate planning. A Waverly Advisor can help navigate this process, providing guidance on how to structure your insurance policies to reflect your unique circumstances.
Top reasons to review your insurance policies annually:
- Adapt to Life Changes: Address shifts in family circumstances, such as marriage, the birth of a child, or changes in health.
- Protect New or Evolving Assets: Adjust coverage to reflect new purchases, property improvements, or changes in asset values.
- Enhance Overall Financial Strategy: Align insurance policies with broader goals, striving to ensure that they support your long-term financial strategy.
LIFE INSURANCE:
MAINTAINING THE RIGHT LEVEL OF COVERAGE
Life insurance is a versatile tool that serves more than one purpose—it can replace income, settle debts, fund business buyouts, or even serve as a wealth transfer mechanism. The right policy can offer peace of mind, while the wrong policy can leave gaps or inefficiencies in your financial plan. An annual review can help determine that life insurance is properly structured to reflect your current needs and goals.
Key considerations for Life Insurance reviews:
- Policy Ownership and Beneficiaries: Verify that policy ownership and beneficiary designations are correct and reflect your current intentions.
- Coverage Adequacy: Adjust death benefits to account for changes in income, debt, or other financial responsibilities.
- Premium Structure and Cash Value: Assess cash value accumulation and ensure premiums remain competitive and in line with financial planning goals.
Life Scenario:
David and Emily, both in their early 50s, bought a life insurance policy a decade ago to cover their mortgage and support their children’s education. Over the years, their financial situation has changed: they have paid off their mortgage, their children are financially independent, and they have built significant wealth through business ventures. During their annual review, they realized the original policy was no longer aligned with their goals. By shifting to a smaller death benefit and increasing their cash value accumulation, they optimized their policy to better fit their current needs—supporting legacy planning and future philanthropic endeavors.
Tip: When purchasing new coverage, insurers often determine your age based on the birthday you are closest to, even if it has not occurred yet. This means that if your next birthday is within six months, they will consider you one year older. Keep this in mind as premiums tend to increase more significantly every five years (e.g., at ages 60, 65, and 70). This is only if new coverage is needed.
A timely review can help identify opportunities to optimize policy structures, making your life insurance a more powerful component of your overall plan.
PROPERTY AND CASUALTY INSURANCE:
PROTECTING WHAT YOU OWN
The value of high-value assets—primary and secondary residences, investment properties, and personal valuables—can significantly fluctuate year to year. Market conditions, renovations, or new acquisitions can all impact your insurance needs. Regularly assessing your property and casualty policies is critical to safeguarding these assets and minimizing liability risks.
Focus areas for Property and Casualty Insurance:
- Property Valuation and Coverage Limits: Ensure that property values are up-to-date, and coverage limits adequately protect your assets.
- Liability Exposure: As your net worth grows, so does your liability exposure. Determine if you have adequate liability coverage to protect against lawsuits or other risks.
- Specialized Coverage: Consider new types of coverage for unique assets, such as artwork, collectibles, or other high-value items.
Life Scenario:
The Thompson family recently completed significant upgrades to their home, adding a guest house and expanding the outdoor living area. When their annual insurance review came up, their advisor noted that the renovations increased the home’s overall value by more than 25%. By increasing their property coverage limits, the Thompsons ensured that the new additions were fully protected and avoided under-insurance risks. Their advisor also suggested adjusting their personal liability coverage to reflect their increased property value and additional guests visiting the new space.
Tip: Consider using a photo documentation service to inventory and categorize your belongings. This can streamline the claims process and potentially increase the payout in the event of a flood, fire, or other loss. Some independent firms may even cover the cost of this service on behalf of their clients—just be sure to ask if it is available to you.
Reviewing your property and casualty policies on an annual basis can determine if you have the coverage necessary to protect what you have worked hard to build.
LONG-TERM CARE INSURANCE:
PLANNING FOR THE UNEXPECTED
Long-term care (LTC) insurance provides essential coverage for the costs associated with extended healthcare needs. Given the rising cost of care and increased longevity, it is crucial that LTC policies remain current and reflect your financial situation and health status. An annual review can help determine that your LTC insurance will support you and your family when needed, without disrupting other elements of your financial plan.
Considerations for Long-Term Care Insurance:
- Evaluating Benefit Amounts and Duration: Verify that coverage amounts, and benefit durations align with potential care needs and expected costs.
- Policy Riders and Options: Assess existing riders and explore new options that may provide more robust coverage or cost efficiencies.
- Integration with Financial and Estate Planning: Determine if LTC coverage fits into the broader context of retirement and estate planning, potentially preserving your estate for future generations.
Life Scenario:
Samantha, age 62, originally purchased a long-term care policy 12 years ago. At the time, the policy’s monthly benefit was sufficient to cover anticipated care costs. However, as healthcare expenses have steadily increased, Samantha’s policy now only covers about 60% of today’s average care costs. During her annual review, her advisor recommended upgrading her policy with an inflation protection rider. This change increased her premiums slightly but helped her determine that her LTC policy would remain effective against future cost increases, providing the comprehensive protection she desired.
Tip: Review your long-term care policy to see which riders are attached.
- Inflation Protection Rider: Keeps your benefits aligned with rising care costs over time, preventing gaps in coverage. If this feature is not included in your policy, consider exploring new options with your advisor.
- Enhanced Elimination Rider: Sets the waiting period before benefits start. Ensures the elimination period is a true 30, 60, or 90 days—not just 30, 60, or 90 days of care, which could take longer if you only receive care a few days per week.
- Return of Premium Rider: If you never use the policy, this rider can return a portion of premiums to your beneficiaries as a death benefit.
- Limited Premium Payment Rider: Allows you to pay off premiums in a set period (e.g., 10 years or less), reducing the risk of future premium increases. This is especially relevant as premiums across the industry continue to rise.
With appropriate coverage, you can prevent the cost of long-term care from eroding your assets or placing an unintended burden on loved ones.
INTEGRATING INSURANCE
WITH YOUR FINANCIAL PLAN
An annual insurance review is not just about checking coverage—it is about determining if all elements of your financial plan work together harmoniously. Life insurance, property and casualty policies, and long-term care coverage should complement your investment strategy, estate planning, and philanthropic goals.
How a Waverly Advisor Can Help
A Waverly Advisor brings an objective perspective and a deep understanding of how insurance fits into your broader financial picture. They help identify potential gaps, recommend changes based on your evolving financial situation, and help you determine that every aspect of your insurance strategy supports your long-term objectives.
Next Steps: Preparing for Your Annual Insurance Review
At Waverly Advisors, LLC, we believe in a holistic approach to financial planning. Our team is ready to guide you through your annual insurance review, helping you to determine that your coverage reflects your current needs and future goals. Contact your Waverly Advisors professional to schedule a review and start the process of building your financial future today.
MEET THE AUTHOR
Drew A. Gearhart, CFP®
Partner, Wealth Advisor
As a Wealth Advisor, Drew loves being his clients’ go-to source for guidance in financial matters as it gives him an amazing sense of professional purpose. He believes making a positive difference in someone’s life is hard to beat; that’s partly why he was drawn to financial planning… Learn More
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