When a client moves, their insurance plan needs to move, too

A move can change much more than a client’s address. A new home, state, commute, and property value can all affect their insurance needs.

“The most common mistake during a move is doing nothing and assuming that all of a client’s policies will follow them,” said Joshua Lavine, CEO at Capitol Benefits, an independent insurance agency in Maryland.

Lavine points out that the second mistake is the opposite: replacing coverage that may not need to be replaced.

“Replacing a perfectly good life or long-term care policy because someone in the new state suggested a fresh application can be an issue, particularly if it means giving up a policy the client qualified for when they were younger and healthier,” Lavine added.

As an advisor, it’s important to recognize the insurance implications of a move and prevent these common mistakes as much as possible.

Otherwise, they may be left with costly gaps that don’t reflect their new circumstances or unnecessary expenses from changing coverage that didn’t need to be changed.

Prioritize auto, home, and health insurance

As soon as a client tells you they’re moving, review their auto and homeowners insurance plans first, since relocating can significantly affect both types of coverage.

“A move can lead to a lapse or even void an auto and home insurance policy,” explained Lavine.

Most carriers require the auto policy to be rewritten in the new state within a set window. In addition, a homeowners policy on a house that is vacant or being rented out is a different risk than the one the carrier underwrote.

Once auto and home insurance have been adequately assessed and updated, it’s time to focus on health insurance as networks and plan availability are tied to where an individual lives.

Don’t overlook life insurance, annuities, and LTC

“Life, disability and long-term care are the least urgent, but they’re also the ones people forget entirely, so they should be reviewed as well,” Lavine said.

These plans generally stay in force when the owner moves. What changes, however,  is the environment around them.

“State guaranty association limits differ, so a client with a large annuity can find the protected amount is lower in the new state than it was in the old one,” Lavine said.

Also, while long-term care benefit triggers and elimination periods don't change, the cost of care does. Therefore, a daily benefit that appeared generous in one market can appear thin in another.

On a hybrid life and long-term care policy, riders that were approved for the state of issue may not be available for a new purchase in the next one. This is particularly relevant if the client ever wants to add coverage.

“It’s not necessarily about replacing these policies. It’s more about knowing what they now include,” Lavine added.

State-specific rules to consider

In many cases, clients don’t realize that community property states like California and Texas treat ownership and beneficiary designations differently than common law states, such as Virginia or Maryland.

If a client is moving into a community property state, a conversation about how their move could affect existing insurance and financial arrangements is worthwhile.

Additionally, state income tax treatment of annuity withdrawals and long-term care premiums can vary.

Some states have their own estate or inheritance tax with exemptions well below the federal figure, and Maryland and Washington, D.C., are both on that list. As a result, a client leaving or arriving there may need to reassess how much life insurance liquidity is appropriate.

Many states also run partnership long-term care programs, and a policy purchased in another state may not qualify for the asset protection those programs provide.

Key steps to take when a client moves

When you learn a client is moving, the first step is to ask for a move date and request their new address. Then, confirm the status of both the old home and the new one, since occupied, vacant and rented are each underwritten differently.

Next, rewrite auto and property insurance in the new state and coordinate the cancellation dates so there is no gap.

From there, review health coverage against the new location.

Then, pull every life, disability, annuity and long-term policy and confirm the address of record, the beneficiary designations, and whether anything about the new state changes the plan.

“Ideally, the client's independent insurance agent, CPA, and estate planning attorney are all involved,” Lavine said.

This way everything can be addressed at once, reducing the risk of coverage gaps or unnecessary policy changes.

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