Many people set up their insurance once and never look back. But life can change, and your coverage needs to keep up. Ryan Ovenden, CFP®, CKA®, Senior Wealth Advisor and Chief Planning Officer, breaks down what an insurance audit really is, when you need one, and why skipping it could cost you far more than you’d expect.
What Is an Insurance Audit?
Think of it like an NFL team reviewing its roster at the end of the season. Ryan puts it this way: “What players do we have on our insurance team? Are they a cost-effective method of transferring risk where we need to? And do we have any holes in our roster that we really need to fill?”
An insurance audit is basically a focused review of all your current coverage. The goal is to answer two questions: What do we have? And what do we need?
Are You Really Over-Insured? Think Again
Contrary to what society might think, many people aren’t over-insured. Ryan says the bigger problem is the opposite: “What we see more often are holes in the plan—areas that were underinsured or not insured at all. We’re rolling the dice, hoping that risk doesn’t play out.” In other words, many people are taking significant financial risks without realizing it.
Ryan learned this firsthand. His family woke up one morning to a foot of sewage water in their basement. Their homeowners’ policy covered flood damage, but not sewer backup. Their max benefit for that specific situation? $10,000. The actual damage? Much more.
“For an extra $25 a year, we could have had $50,000 worth of sewer backup coverage. That extra 25 bucks would have saved us $40,000.”
How Often Should You Do an Insurance Audit?
Ryan recommends reviewing your coverage every 2–3 years as a baseline. His firm recently implemented an annual calendar to help ensure clients review insurance roughly every two years. But certain life events should trigger an immediate review, regardless of timing:
- Getting married or divorced
- Having a child
- Buying a home or taking on any new debt (mortgage, car loan, etc.)
- Changing jobs, especially if you’re leaving employer-provided group benefits
- Approaching retirement
Should You Self-Insure Some Risks?
Not every risk needs a policy. Ryan’s approach is straightforward: Transfer the biggest risks to an insurance company, and self-insure the smaller ones. “There’s risk in having too much insurance, there’s risk in having not enough insurance.”
Carrying low debt, keeping expenses down, and maintaining a healthy cash reserve can all reduce how much insurance you may actually need. For example:
- A solid 3–6-month emergency fund may replace the need for a short-term disability policy.
- If you’re close to retirement age and near Medicare eligibility, long-term disability insurance may not be necessary.
Use Your Financial Advisor to Help with Your Audit
An insurance audit can technically be done solo, but Ryan is clear that it’s done best with a professional. “Having somebody alongside you to do a lot of the heavy lifting for you, I think, is worth what it might cost you in the end.”
A good advisor isn’t trying to sell you a product. They’re asking the right questions, explaining the why behind each recommendation, and catching the gaps you wouldn’t think to look for—like a $25/year sewer backup rider that Ryan, despite being a financial professional himself, had missed on his own policy.
Don’t Wait for Something to Go Wrong
An insurance audit might cost a little more upfront to fill in the gaps, but the payoff can be enormous. The goal is the right coverage, at a reasonable cost, with no surprises when it matters most.
If you haven’t reviewed your insurance recently, now is the time. Get in touch with our team today, and let’s help make sure every player on your insurance roster is pulling their weight.
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