Getting Your Financial House in Order—Part 3: You Need a Strong Defense

Interesting that we’re talking about a strong defense after a Super Bowl that barely had any …


OK, so here we are, one month into the new year. A new year is a great time to start putting your financial house in order, and this is the third article in the series that is designed to help you do so.

The first article focused on spending and saving. The second discussed how to start protecting your assets. That post offered ideas on protecting against personal risks, like death or disability. This post will offer ideas on protecting your physical assets, like your home, cars, and other physical possessions.

Most of us have had auto and homeowner’s insurance for years, so we have a pretty good idea of how it works. Unfortunately, I have found that most people put their property and casualty policies on autopilot, where they effectively set it and forget it. Clients often tell me that they have been with the same insurance company for 10, 15, 20 years or more. That’s not a good idea for many reasons.


First, it’s going to cost you money. You might think that the insurance companies would do their best to take care of their longtime, loyal customers. But you would be wrong. In fact, they do just the opposite.

When it’s time for premium increases (which seems like every year), they pass along the biggest increases to the clients who have been with them the longest. That’s because they know that you are not shopping around and will just renew without question. Their best rates are often saved for newer policyholders. I’ve heard this referred to as the Loyalty Penalty.

If you’ve been with the same carrier for a few years, shop around when you get your next renewal notice. You may be surprised by how much you can save.

You should also review your policies on a regular basis because of changes in your life. For example, when you are young and don’t own many financial assets, you might carry lower liability limits than when you are older and have more substantial assets to protect.


Not many young couples have a need for the extra liability protection that an umbrella policy offers, but once you have some assets, you don’t want to leave them open to a lawsuit, especially in the litigious world in which we live.

When reviewing your homeowner’s policy, it’s also important to make sure that your coverages are keeping up with the value of your property. As construction costs and the value of your property increase over the years, you want to make sure that your coverage limits are keeping up.

A lot of policies have built-in inflation increases, where the coverage amount will increase each year. You should review to make sure that the policy increases have not outpaced the increases in home value. While it’s important not to be underinsured, you don’t want to be over-insured either.

Here are some other points you should consider when reviewing your property and casualty risks:

  • Check to make sure that your homeowner’s policy includes replacement cost for your personal property. If not, you will have actual cash value coverage. That means that, if you suffer a loss, the insurance company will pay you what the item is worth at the time of loss, not what it would take to replace it.

  • Check your homeowner’s deductible. You don’t want to make small claims against your homeowner’s policy, so bump up your deductible. It will save you money on the premiums you pay.

  • Check your auto policy deductible. I keep my collision deductible higher than most—I’ll only pay it if I’m in an at-fault accident. The way that I look at it is, if the accident is my fault, I’ll pay the penalty of a higher deductible. In the meantime, I’ll benefit from lower premiums.

  • Have you acquired any personal items of considerable value? Items like jewelry, art, and collectibles typically have limits within your policy. You can purchase separate riders to make sure those items are covered.

Make sure to review all your policies—auto, homeowner’s (or renter’s), boat, condo, motorcycle, RV, etc. It won’t take a lot of your time, and it could reap substantial savings. Or it could help prevent big losses when that claim hits. Remember, being successful financially means doing a lot of little things right.