It’s so easy to get caught up in this. It happens on every possible type of insurance but let’s take the example of my home insurance policy. I bought the policy a few years ago and had coverage worth $250,000. That was enough to cover anything that could happen really and there was no point in getting more than that.
Things Do Change Though
In the past few years, my house’s value has increased by 100K and I have also purchased many expensive items and some furniture. The basic problem is that if something did end up happening, there’s no doubt that I’d come up short with a $150,000 check. Can you imagine how I’d feel if my place ended up burning down knowing that I simply did not take the time to update my coverage?
Do It Every 5 Years At A Minimum
I personally like to go over my recurring expenses (including insurance) every year. I just try to verify that all those expenses do still make sense. I seem to find one or two every year that I can eliminate or greatly reduce. Unfortunately, those are often offset by insurance coverage that are not sufficient or outdated. I guess it’s normal that as I accumulate assets, my insurance needs increase. Not having updated coverage could be something that I’d end up regretting so it’s certainly important for me to do an annual review. It might not be necessary to do it every single year but I’d argue that it takes so little time…
“Have my circumstances changed in terms of my house, my car, my family, etc?”
If so, the current policy may or may not still be appropriate.