Have an Insurance Strategy
Insurance provides protection. As simple as that sounds, many individuals spend little
time considering all their insurance options to make sure they have the insurance they need
at the most reasonable price.
Here is a checklist of types of insurance and some items to consider:
Insuring your home and its contents is very prudent. If disaster strikes, you want to be
protected. Choose a policy that will pay for the cost of rebuilding your home if it is
totally destroyed. Examine the amount regularly to take inflation into account. Also make
sure the "contents" part of your policy is adequate. A policy that covers the cost of
replacing items is better than one the just covers the "cash value" of an item. A six year
old dishwasher may only have a $200 cash value, but will cost $800 to replace. Keep
an-up-to-date inventory of your belongings with a copy in your safe deposit box.
Auto policies are usually comprised of three parts:
- Collision coverage covers the cost of repairs to your car after an accident. Choose
an amount of collision coverage that reflects the value of your car. If your car is old
or has little value, you may even want to drop the collision part of your policy.
- Comprehensive coverage covers damage to your car from random acts like fire, theft,
hail and vandalism. This part of the policy is usually the cheapest and should be based
on the value of the car. Remember that insurance companies will not pay more than the
car is worth.
- Auto liability is absolutely essential. This covers damages caused by your car. If
you cause an accident with your car and injure someone or damage their property, your
auto liability insurance will pay the injured person's medical and repair expenses.
This is usually the most expensive part of the policy and most states require it.
Umbrella liability insurance.
Most homeowners and auto policies provide some level of coverage for damages caused to
others and their property. In an era of large jury awards and rising medical costs, you may
want to consider an umbrella policy. These policies are usually inexpensive (a few hundred
dollars for over a million dollars coverage) and are available from most insurance
Be sure you have adequate health insurance. Most large employers provide it as part of their
benefits program. While you may be required to share in the cost, a company provided plan is
usually cheaper and has fewer restrictions than a policy bought individually. Choose the
level of coverage you need, but make sure you are covered for major medical expenses.
Most employee benefit programs provide some form of disability coverage. Check your program
to make sure the amount is adequate for your needs. Also, look at the details (definition of
disability, waiting period and any total limits) to ensure your policy will provide all that
you need. If you need more, talk to an insurance professional or consider policies offered
by any professional organization you belong to.
Long-term care insurance.
Some estimate that over one half of individuals will spend some time in a nursing home or
other care facility before they die. The costs of this type of care can be very high and the
federal Medicaid program will not cover all the expenses you may incur. Usually, age 50 is
about when to consider a long-term care insurance policy. Premiums will be higher for older
buyers. Examine any policy before buying to fully understand what will be covered and for
Three questions - how much do you need, what type of policy, where should you buy it?
For most people, life insurance is simply a way to ensure that a surviving spouse and
children can continue to have a decent lifestyle. Many experts suggest that a primary
breadwinner should have insurance equal to 6 to 10 times their annual income. In most cases,
this will provide enough money for the survivors to be at least reasonably comfortable. If
you have young children or other special needs, additional amounts should be considered.
Deciding whether to buy a term policy or a cash value whole life policy should be
carefully considered. Term policies are usually much cheaper, but whole life policies
provide for a "cash build up" for the duration of the policy. Reviewing the options with a
qualified advisor is essential.
Luckily, life insurance is available from many sources. Start with your employer. Many
employee benefit programs provide inexpensive coverage. Term and whole life policies are
available from hundreds of companies.
The insurance company.
Be sure to investigate the company offering any policy you are considering. Quality customer
service and financial stability are essential. When you end up needing the insurance, the
last thing you want to discover is that the company is hard to deal with or that their
financial condition prevents them from providing the benefits you paid for. Check with the
Better Business Bureau and examine the insurance rating reports found in many libraries and
on the Internet.
Choosing a homeowners, auto or health policy will usually involve deciding on a level of
deductible. The deductible is what you pay before the insurance starts paying. The higher
the deductible, the lower the premium. Before buying, ask for the premium levels at
different levels of deductibles. Then evaluate the level of "risk" you are willing to
assume. You may find that your premium can be up to 25% less.