Insurance CheckUp: As you make your plans for the new year, take a moment to think about all the things that could go wrong in the next 12 months. Fire. Theft. Untimely death.

Once you've completed this gloomy exercise, review your insurance policies. There's a good chance that you're not adequately prepared for misfortune.

A recent survey found that millions of Americans are underinsured in several critical areas. But the study also found that many of them are paying for coverage they don't need. The survey was conducted by Trusted Choice, a group of insurance agencies and financial firms.

Areas where you may be underinsured:

 Homeowner's insurance. Millions of homeowners have taken advantage of low-interest home equity lines of credit to remodel their homes, notes Madelyn Flannagan, a spokeswoman for Trusted Choice.

Yet nearly 40% of Americans who have made significant home improvements since 2003, such as adding a room or deck, said they hadn't updated their homeowner's insurance, or weren't sure if they had.

That could be disastrous if your home is destroyed, Flannagan says. If your policy is based on the value of your home before you remodeled, you may not recoup the money you spent to add a bathroom or update your kitchen, she says.

 Coverage for valuables. Nearly half of Americans surveyed who own expensive jewelry, fine art, wine or other valuables said they didn't have insurance to cover them.

Most standard homeowner policies won't cover the cost of replacing such items, Flannagan says. You may need a "rider" or separate policy to insure those items, she says.

If you got engaged over the holidays, share the good news with your insurance agent, because you may need extra coverage for your engagement ring. The insurance will cover theft or loss, says Flannagan, who knows how easy it is to lose an engagement ring. Hers slipped off her finger one cold day while she was visiting the reindeer at a Santa's Land park in Vermont. "I had coverage and was able to replace my ring," she says.

 Life insurance. About a third of families with a new baby said they hadn't updated their life insurance, according to Trusted Choice.

Many companies provide some life insurance to their workers ? but don't assume that such coverage is enough. A typical employer-provided policy will cover twice your annual salary ? at most. For an employee who makes $50,000 a year, that works out to $100,000. "That's not going to pay a mortgage, send your child to college and help someone get their life back on track," Flannagan says.

And these days, you can significantly increase your life insurance coverage without spending a lot of money. Life insurance premiums have been dropping for a decade, and they're expected to fall 3% in 2006, according to the Insurance Information Institute.

Life insurance "is such a bargain right now," says Byron Udell, chief executive officer of AccuQuote. "You can buy three times as much coverage as you could in 1994."

In fact, life insurance premiums have fallen so much in recent years that you may want to consider "refinancing" your life insurance policy. You can use Internet sites such as accuquote.com, insure.com or insweb.com to compare premiums. You may find that you can lower your premiums or increase your coverage at no additional cost, Udell says.

One caution: If you decide to switch policies, don't cancel your existing policy until your new one is in place. Otherwise, you risk leaving your family unprotected.

And while you're at it, make sure you have enough disability insurance. If you're self-employed, talk to your insurance agent about a private disability policy. Even if you have coverage through your employer, you may need supplemental coverage to ensure your family is protected.

Unnecessary coverage

A review of your insurance coverage may also uncover areas where you're overinsured, according to Trusted Choice. Some potential sources of insurance savings:

 Update your policy if a young driver moves out. More than four out of 10 families said they hadn't updated their auto insurance coverage after a driving-age child moved away. If you're still paying premiums to cover a child who is in college, "You could be paying as much as 50% too much," Flannagan says.

 Skip baggage and flight insurance. More than 7% of those surveyed said they had bought flight insurance, and 4% had insured their baggage. Such policies are usually unnecessary, Flannagan says.

Homeowner's insurance should cover lost or stolen luggage. And if you have life insurance, "you don't need to buy a separate policy when you get on the airplane," she says.

Sandra Block covers personal finance for USA TODAY.