If you want to simplify your personal finances make sure your covered. What I mean is you want to make sure you have the appropriate amount of insurance coverage. You do not want to be left standing naked when a medical, natural disaster, or other financial situation occurs which can place a significant financial burden on you.

Many times we look to save money and do not properly insurance ourselves because we say hey its not going to happen to me. But you never know its always better to be prepared for the situation than unprepared. Think of it this way can you afford to rebuild your home if it was significantly damaged without having adequate insurance coverage? Probably not. So why put your financial future at risk to save a few extra bucks each month.

Here is what you must do to make sure you are not left standing financially naked:

Review your insurance policies regularly – Review your existing polices to determine the amount of coverage you have and what is covered. Many times we establish insurance policies and we never review them until we really need them and then find out what we thought was covered is not covered. Many times when you established the policy several years ago your financial situation was different than it is today. So remember to review your policies to understand your coverage.

Review your deductible – Know your deductible amount and make sure it is adequate. Many times we want to lower our insurance bill because we think it is too expensive. To do this we either reduce the coverage or increase our deductible. But before you decide to change your deductible consider the impact this can have on your financial situation. Yes it can lower your monthly or annual payment but what will happen when you need to file a claim will you have the funds. For example, you may be able save money by increasing your deductible from $1,000 to $2,000 but do you have the additional funds saved if something does occur. Look at the worse case and if your able to cover yourself without putting yourself in a significant financial burden if something does occur go for it. Just think before you do something just to save a little. The long-term consequences can be more damaging than the short-term relieve you will receive.

Financial stability of insurance company – How stable is your insurance company will be able to cover your claims. From year to year the financial stability of your insurance company can change which may impact their ability to pay your claims. What you don’t want to happen is your insurance company to go out of business when you need them. Trust me it does happen. Luckily, my claims were paid. So check on your insurance company’s rating to find out their financial situation.

Adequate coverage – Review your current financial situation and determine your appropriate coverage. For example, has your home increased in value and you need to increase the coverage. Have you made improvements or additions to your home which were not originally covered. Do you have significant cash or emergency fund to cover a higher deductible or do you need to lower your deductible due to lack of cash reserves. Do you have additional drivers in your household and need to review your current auto insurance. Has you first child been born and you need to review your medical coverage. Make sure your covered for your current situation. What was sufficient two years ago may not be sufficient coverage today.

Pay your premium on time – One of the worse feelings is finding out your insurance has been dropped because you did not pay your premium on time. Most insurance policy premiums have 30 day grace periods, which allows you to pay your premium within 30 days of its due date. However, if forget you to pay it within those 30 days you could be dropped and it is possible you may have to wait 30 days or longer to be reinstated. This means you will not be covered during this period so you may want to cross your fingers and hope nothing happens during that time. An easy solution to this is to set up an automatic debit from your bank account to the premium or have the premium automatically charged to your credit card. Here are two related post why you should pay on time and how you should pay.

Here are six insurance policies depending on your situation you should consider so you are not left standing financially naked:

1) Homeowner’s / renter’s insurance
2) Medical insurance
3) Car insurance
4) Natural disaster insurance
5) Life insurance
6) Disability insurance

If you want to live a simple financial lifestyle take action now by reviewing your existing insurance coverage to make sure your adequately covered so your not left standing financially naked wondering what to do now.

So how often you review your insurance policies?

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Til next time take it one step at a time to simplify your finances.