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--- |
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name: insurance-optimizer |
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description: Review insurance coverage and find opportunities to optimize premiums and reduce gaps. |
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--- |
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# Insurance Optimizer |
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Review current insurance coverage, identify gaps or overpayment, and suggest strategies to optimize premiums. Covers auto, home/renters, health, and life insurance. |
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**DISCLAIMER: This provides general information only, not professional insurance or financial advice.** |
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## When to Use |
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- User wants to review if they're over- or under-insured |
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- User is paying too much and wants to save |
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- User wants to understand their coverage |
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- User is shopping for new insurance |
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## When NOT to Use |
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- Filing insurance claims |
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- Complex commercial insurance |
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- Specific policy interpretation (consult agent) |
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## Methodology |
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### Step 1: Gather Current Coverage |
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Ask the user for their current policies. For each, collect: |
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- **Type**: Auto, home/renters, health, life, umbrella, disability |
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- **Provider**: Who is the carrier? |
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- **Premium**: Monthly or annual cost |
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- **Deductible**: How much they pay before insurance kicks in |
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- **Coverage limits**: Maximum the policy will pay |
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- **Key features**: What's included, what's excluded |
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### Step 2: Assess Coverage by Type |
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#### Auto Insurance |
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**Minimum recommended coverage:** |
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| Coverage | Recommended Minimum | Notes | |
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|----------|-------------------|-------| |
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| Bodily injury liability | 100/300 ($100K per person, $300K per accident) | State minimums are dangerously low | |
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| Property damage liability | $100,000 | Covers damage to other vehicles/property | |
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| Uninsured/underinsured motorist | Match liability limits | Protects you from uninsured drivers | |
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| Collision | Based on car value | Consider dropping if car value < 10× annual premium | |
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| Comprehensive | Based on car value | Covers theft, weather, animals | |
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| Medical payments / PIP | $5,000-$10,000 | Covers your medical costs regardless of fault | |
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**Drop collision/comp test:** If car value (KBB private party) < 10× the annual collision+comp premium, OR < ~$4,000 outright → self-insure. A $3,000 car with a $1,000 deductible and $400/yr premium means best-case payout is $2,000 — you're paying 20%/yr to insure that. |
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**Liability floor:** 100/300/100 minimum. State minimums (often 25/50/25) won't cover a single hospital visit. If net worth >$500k, bump to 250/500/100 + umbrella. |
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#### Home / Renters Insurance |
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**Homeowners:** |
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| Coverage | Guideline | |
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|----------|-----------| |
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| Dwelling | Full replacement cost (NOT market value) | |
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| Personal property | Enough to replace belongings (do a home inventory) | |
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| Liability | $300,000-$500,000 minimum | |
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| Additional living expenses | 20% of dwelling coverage | |
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| Deductible | $1,000-$2,500 (higher = lower premium) | |
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**Commonly missed:** Flood (NOT in standard policies — check FEMA zone), earthquake (separate), scheduled riders for jewelry/art >$1,500-2,500, sewer backup, home business equipment. |
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**Renters:** $15-30/mo for $30-50k property + $100-300k liability. Best value in insurance — never skip. |
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#### Health Insurance |
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| | HMO | PPO | HDHP + HSA | |
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|---|---|---|---| |
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| Premium | Lower | Higher | Lowest | |
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| Deductible | Lower | Moderate | Highest ($1,650+ ind.) | |
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| Network | Referral needed | Any | Any | |
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| Best for | Low utilization | Frequent specialists | Healthy + want tax savings | |
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**HSA advantage:** Triple tax benefit — contributions deductible, growth tax-free, withdrawals tax-free for medical. 2026 limits: $4,400 individual / $8,750 family (+$1,000 if 55+). The only account in the tax code better than a Roth IRA. Save receipts — reimburse yourself decades later, tax-free. |
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**HDHP break-even math:** `(PPO premium − HDHP premium) × 12 + employer HSA contribution` = your buffer. If expected annual healthcare spending < buffer + tax savings on HSA contribution, HDHP wins. Most healthy people under 50 without chronic conditions come out ahead on HDHP. |
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#### Life Insurance |
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**How much:** |
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- Rule of thumb: 10-12× annual income |
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- More precise: Calculate total financial obligations (mortgage, debts, children's education, income replacement for X years) minus existing assets |
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**Term vs. Whole — run the math:** |
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| | Term (20yr, $500k) | Whole ($500k) | |
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|---|---|---| |
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| Monthly, healthy 30yo | ~$25-30 | ~$200-450 (8-15× term) | |
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| Cash value after 20yr | $0 | ~$50-80k (2-4% IRR after fees) | |
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| "Buy term, invest the difference" | $300/mo in index fund @ 7% real → **~$150k** after 20yr | — | |
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The salesperson's commission on whole life is typically 50-100% of the first-year premium — that's why it's pushed hard. Whole life makes sense only for: estate tax planning above the ~$15M exemption, special-needs trust funding, or maxed-out every other tax-advantaged account and still have excess. |
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**Term life is right for 90%+ of people.** Ladder policies (e.g., $500k/30yr + $500k/20yr) to match declining need as mortgage shrinks and kids age out. |
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#### Umbrella Insurance |
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**The $500k trigger:** Standard auto/home liability maxes out at ~$300-500k. Once your attachable net worth (home equity + taxable brokerage + savings — exclude 401k/IRA, they're federally protected from most judgments) crosses ~$500k, you're a lawsuit target without a shield. |
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- Coverage = total attachable net worth, rounded up to nearest $1M |
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- Cost: **~$150-300/yr for first $1M**, each additional $1M only ~$75-100/yr. $5M runs ~$500-700/yr. The cheapest insurance per dollar of coverage in existence. |
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- **Prerequisite:** most carriers require $250-300k underlying liability on auto/home before writing umbrella |
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- **Get it if:** net worth >$500k, rental properties, teenage drivers, pool/trampoline/dog, coach youth sports, high public profile, or you post opinions on the internet under your real name |
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### Step 3: Identify Gaps |
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Common coverage gaps to flag: |
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- [ ] Liability limits too low relative to net worth |
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- [ ] No umbrella policy |
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- [ ] No disability insurance (protects income — most overlooked insurance) |
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- [ ] No flood/earthquake in at-risk area |
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- [ ] Renters without renters insurance |
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- [ ] Life insurance insufficient for dependents |
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- [ ] Health plan doesn't cover needed specialists |
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- [ ] No scheduled coverage for high-value items |
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### Step 4: Find Savings |
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**Deductible break-even math (compute this, don't guess):** |
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```text |
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break_even_years = (high_deductible − low_deductible) / annual_premium_savings |
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``` |
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- $500 → $1,000 deductible typically saves 15-30% on collision/comp (NOT proportional — doubling deductible does not halve premium) |
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- Avg driver files a claim every **6-8 years**. If break-even < 3 years and you have the emergency fund, raise it. |
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- Example: $500→$1,000 saves $200/yr → break-even 2.5yr → clearly worth it. Saves only $50/yr → 10yr break-even → skip. |
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- **Bank the savings** in a dedicated account until it equals your highest deductible — self-insure the gap. |
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**Shopping cadence — loyalty is a tax:** |
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- **Auto: re-quote every 6 months** (standard policy term). Carriers use "price optimization" — they raise rates on customers their models predict won't shop. ~22% of shoppers who compare find a cheaper rate. Early-shopper discounts: up to 10-15% for quoting before your current policy expires. |
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- **Home: re-quote every 2-3 years** or after any claim-free stretch |
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- **Life: re-quote after health improvements** — quit smoking 12+ months, lost significant weight, A1C normalized. Rates can drop 50%+. |
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- **Trigger events** that should always prompt a re-quote: birthday (esp. 25), violation falls off record (~3yr), credit score jump, marriage, move, paid off car |
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**Savings strategies by impact:** |
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| Strategy | Savings | Notes | |
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|---|---|---| |
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| Shop every 6mo (auto) | 15-30% | The Zebra, Insurify, or independent agent — get 3+ quotes | |
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| Raise deductibles | 10-25% | Only if emergency fund covers it; do break-even math | |
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| Bundle home + auto | 10-25% | But quote unbundled too — bundle discount sometimes masks one overpriced policy | |
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| Drop collision/comp | 100% of that premium | When car value < ~10× annual premium OR < $4,000 | |
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| Pay annually | 5-10% | Avoids monthly installment fees | |
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| Telematics (Progressive Snapshot etc.) | 10-30% for safe drivers | Can also RAISE rates — know your driving | |
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| Credit score improvement | 5-25% | Insurers use credit-based insurance scores in most states | |
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**Comparison sites:** The Zebra / Insurify (auto+home), Policygenius (life+disability), Healthcare.gov (ACA). All free. An independent broker who writes for multiple carriers beats a captive agent (State Farm/Allstate only sell their own). |
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### Step 5: Prioritize — Gaps Before Savings |
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Fix underinsurance first (existential risk), then optimize premiums (efficiency). |
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## Output Format |
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```text |
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# Insurance Review: [Name] |
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## Current Coverage Summary |
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| Type | Provider | Premium | Deductible | Coverage | Assessment | |
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|------|----------|---------|-----------|----------|------------| |
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| Auto | [co] | $X/mo | $Y | 100/300/100 | Adequate | |
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| Home | [co] | $X/mo | $Y | $Z dwelling | Gap: flood | |
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| ... | | | | | | |
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## Total Annual Cost: $X,XXX |
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## Gaps Identified |
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1. **[Gap]** — [risk explanation and recommendation] |
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## Savings Opportunities |
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1. **[Strategy]** — estimated savings: $X-Y/year |
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## Action Items |
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1. [ ] [Highest priority action] |
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2. [ ] [Next priority] |
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3. [ ] [Shop for quotes by date] |
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## Disclaimer |
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General information only. Consult a licensed insurance professional for specific policy advice. |
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``` |
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## Best Practices |
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1. **Review annually** — needs, rates, and life circumstances change |
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2. **Shop around** — get 3+ quotes; loyalty rarely gets the best rate |
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3. **Understand deductibles** — ensure your emergency fund can cover them |
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4. **Don't underinsure to save** — $50/month savings isn't worth major exposure |
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5. **Ask about discounts** — most insurers have unadvertised discounts (ask explicitly) |
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6. **Read the exclusions** — know what's NOT covered, not just what is |
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## Limitations |
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- Cannot provide actual quotes or bind policies |
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- Cannot compare specific policy documents (recommend an independent agent for that) |
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- Cannot interpret specific policy language or coverage disputes |
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- Not a licensed insurance advisor |
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- Rates and regulations vary significantly by state |