What is an insurance review? Umbrella, disability and long-term care

This guide explains insurance topics in general terms. It does not recommend a company, a policy or an amount of cover. For any policy, talk with a licensed insurance agent and read the policy itself.

What is an insurance review?

An insurance review checks whether the cover you own matches the risks your financial plan depends on. It lists what you have, what it pays, what it leaves out and where policies overlap. The goal is to find gaps before a loss, not after one.

Seek First describes its Risk Management service this way: “We evaluate your life, long term care, health and property insurance coverages to ensure your family’s financial security isn’t compromised by unexpected events.” On its How We Serve page, the firm lists steps such as a comprehensive review of insurance coverages, work on life, disability and long-term care, coordination of property and casualty insurance, and analysis of employer benefits. Insurance is one of the five pillars in the firm’s Comprehensive Financial Strategy: taxes, investments, legal, insurance and goals. A review looks at insurance next to the other four, because a loss in one area can wreck a plan in another.

Why does insurance belong in a financial plan?

Because one large, unplanned loss can undo years of saving. Insurance moves that risk to a company for a price. A plan decides which risks to move, which to keep and how much of each.

Think of three layers. The first is risks you can pay out of pocket, such as a small repair. The second is risks that would hurt but not break you. The third is risks that could end your plan, such as a major lawsuit, a long illness or the loss of your income. Insurance matters most for the third layer.

For Christian families, stewardship adds a reason. Caring for a spouse, children and aging parents is part of the work. Covering a risk you cannot absorb is a way to keep that promise. Our page on biblical stewardship explains the idea, and the glossary defines stewardship.

What does a review cover, step by step?

A good review follows a set order. This table gives the common checklist.

Bring every policy to the meeting. The review is only as good as the paper in front of it.

What is an umbrella policy?

An umbrella policy is extra personal liability cover that sits above your home and auto policies. NAIC says, “An umbrella policy may cover liability claims your primary policy does not cover.” It adds that the policy “can also pay for liability and legal defense costs that exceed the amount your primary insurance policy will pay.”

See the glossary entry on umbrella liability insurance for the short version.

What it does not do matters just as much. NAIC says, “Umbrella policies will not pay for damage to your home or vehicle.” It covers claims against you, not losses to your own property.

Questions to ask:

1. What are the liability limits on my home and auto policies?
2. What would a serious claim against me cost?
3. Does the umbrella require a minimum on the underlying policies?
4. Does it cover rental property, a vacation home or a boat?
5. Does it cover anyone else in my household, such as a teen driver?

Your agent can answer the policy details. A planner can help you judge the amount against your net worth and income.

What is disability insurance, and who needs it?

Disability insurance pays income if illness or injury keeps you from working. NAIC states, “Disability insurance is not the same as workers’ compensation.” For a working household, your paycheck over the years is often worth more than your home.

NAIC explains the usual shape: “Short-term will typically replace a portion of the policyholder’s salary for three to six months.” Long-term policies pay longer. The details differ widely.

These are the terms to compare:

Longer waiting periods lower the price. NAIC says, “Policies with longer waiting periods generally have lower premiums.” That trade only works if you have cash to cover the gap.

If you get cover through work, find out what it pays, who owns it and what happens if you change jobs. A group plan may not follow you. Check your own plan for the amount, the definition and who owns it.

What is long-term care, and how do families plan for it?

Long-term care is help with daily living over a long period, such as home care, assisted living or nursing care. Planning means deciding how you would pay for it. Insurance is one answer among several.

The ACL’s LongTermCare.gov gives the odds: “Someone turning age 65 today has almost a 70% chance of needing some type of long-term care services and supports in their remaining years.” It also says, “The duration and level of long-term care will vary from person to person and often change over time.”

Medicare does not solve this. NAIC says, “Public programs, such as Medicare and Medicaid, also cover certain limited LTC services.” So most families face a choice. They can set aside their own savings, buy a policy or rely on family. Many use a mix. The glossary entry on long-term care insurance lists the main features.

If you shop for a policy, know what you are weighing. NAIC says, “Additionally, premium rates for newly issued policies have risen as the remaining writers have refined their pricing.” Ask about premium increases and what you can do if the price goes up. NAIC also notes, “Most LTCI policies are purchased by individuals through insurance agents,” so use a licensed agent and compare more than one offer.

Ask these questions:

1. Who would provide care, and where?
2. What would care cost in my area? Ask your agent for local figures.
3. Which savings would pay for it, and what would that do to my spouse?
4. Which of my other plans change if I need care?

Care costs also touch your tax plan. Large medical costs can change your return, so tell your CPA about any plan.

What about life, health and property insurance?

They get the same review. The questions are different for each one.

For life insurance, check the amount, the type and the beneficiaries. Is the cover meant to replace income, pay off debt, leave money to heirs or cover an estate cost? Match the cover to the job. Term policies end on a date, so mark that date. Beneficiary forms often control who receives the money, so keep the names current and tell your estate attorney. See our California estate planning checklist.

For health insurance, check the plan you have now and the plan you will have at 65. The SSA says that if you delay Social Security past 65, you “should still apply for Medicare benefits within 3 months of your 65th birthday.” Waiting longer can cost more, and higher income can add a Part B charge called IRMAA. Our retirement income guide covers how Medicare and Social Security fit together.

For property insurance, check the limits against what you own. Review the deductible, any exclusions and any special items. Ask your agent if the home’s coverage amount has kept up with rebuilding costs. If you rent out a property, ask how it is covered. Property cover is a topic your agent knows best.

What gaps and overlaps do reviews often find?

Reviews tend to turn up the same kinds of issues. This list is general, and your own file may show none of them.

Write down each issue with a name next to it: you, your agent, your CPA or your attorney. A gap with no owner does not get fixed. Then set a date. Some fixes take weeks, because a policy may need medical review before it is issued.

Ask your agent for a plain list of exclusions on each policy. A short, honest list of what a policy does not pay for is the most useful page in the file.

How often should I review my coverage?

Review it at least once a year, and again after a life change. Events that should trigger a review include:

1. A marriage, a birth or an adoption.
2. A new home, a new car or a rental property.
3. A job change or a raise.
4. A new business.
5. A child leaving home or a parent needing care.
6. Retirement, or the start of Medicare.
7. A major gift or inheritance.

Put the review date on the same day you review your tax plan. A yearly check keeps your coverage in step with your plan.

Next step

Insurance sits inside the Comprehensive Financial Strategy that Seek First builds for families. Read how the firm works with families and how it coordinates trust and estate planning with the rest of the plan. To go through your own coverage, schedule a free call for 20 minutes or phone (866) 398-4044.