Why You May Have Too Much Home Insurance

September 26, 2014

by Michelle Perry Higgins

There are 76.4 million baby boomers (including women with longer life expectancies) approaching the age when they might need assistance with long-term care. Meanwhile, 70% of people turning age 65 can expect to need some form of assistance during their lives. Baby boomers are healthy and active with longer lifespans than previous generations–how will they provide for the long-term-care assistance that a significant number will need?

Long-term-care insurance may be the answer in some cases but there are challenges. The policies are not cheap and costs have been rapidly increasing in recent years. There are, however, ways to make the policies more affordable, such as limiting the period of coverage. Also, some people may be in a position to self-insure their long-term-care needs. In any event, I recommend that people sit down with a financial adviser or qualified long-term-care agent to at least explore their options in this area.

On the other hand, home insurance is an area where people may be overinsured by having a deductible that is too low. Filing a claim against a home-insurance policy may well result in an increased premium or nonrenewal of the policy. Therefore, the policy holder needs to consider at what level of loss it would be worthwhile to file a claim. If, for example, the policy holder has a $1,000 deductible but can self-insure for more, it may make sense to increase the deductible and save a little bit on the premium.