Adding Up Your Insurance Needs

The insurance decisions you make should be based on your family, age, and economic situation. There are many forms of insurance and, unfortunately, no one-size-fits-all policy. Life insurance, for example, can be a virtual necessity, especially if you have a spouse and children. Disability insurance, which provides an income stream if you are unable to work, is important for everyone.

Most people require some amount of all of these categories of insurance.

Auto Insurance: Shop Carefully, But Don’t Underbuy

Auto insurance helps protect you from damage to the often-considerable investment in a car and/or from liability for damage or injury caused by you or someone driving your vehicle. It can also help cover expenses you or anyone in your car may incur as a result of an accident with an uninsured motorist.

Auto liability coverage is necessary for anyone who owns a car. Many states require you to have liability insurance before you can register a vehicle. State-required minimum coverage, however, is often too skimpy to provide adequate protection. Of course, these figures will vary depending on your individual situation and requirements. Collision, fire, and theft coverage is also advisable for a vehicle having more than minimal value. You can cut costs, however, by choosing a higher deductible — the amount of loss that must be exceeded before you are compensated.

The cost of auto insurance varies greatly, depending on the company and agent offering it, your choice of coverage and deductible, where you live, the kind of vehicle, and the ages of drivers in the family. Substantial discounts are often available to safe drivers, nonsmokers, and those who commute to work via public transportation.

Homeowners Insurance, For Renters And Owners

Homeowners insurance should allow you to rebuild and refurnish your home after a catastrophe and help cover to costs of lawsuits if someone is injured on your property. Coverage of at least 80% of your home’s replacement value, minus the value of land and foundation, is necessary for you to be covered for the cost of repairs.

There are several grades of policies, with increasingly comprehensive coverage and cost. Unless you increase coverage, most homeowners policies cover the contents of the house for 50% to 75% of the amount for which the house is insured. The liability coverage in many homeowners policies is $300,000. This figure will vary depending on your individual situation and requirements.

Liability Insurance: Protecting Your Assets

Often called umbrella liability coverage, this takes effect when the personal liability and lawsuit coverage in other policies is exhausted. The cost for $1 million worth of protection — especially necessary for high-income individuals and those with considerable assets — may be only a few hundred dollars a year.

Life Insurance: Your Needs Dictate the Kind And Level Of Protection

Life insurance, payable when you die, can provide a surviving spouse, children, and other dependents the funds necessary to help maintain their standards of living, can help repay debt, and can help fund education tuition costs. The amount you need depends on your situation. If you make $100,000 a year, have a sizable mortgage, and two kids headed to a good (read: expensive) college, you could need as much as $1 million in coverage.

Value-accumulating whole life or universal insurance is often offered as death benefit protection with a cash value component  that you can borrow against or eventually cash in by surrendering the policy. Term insurance costs less, but may remain in effect only for a specified term of years. For many families, a combination of whole life and term insurance may provide for current and future needs.

Your financial professional can help you assess your needs to determine the kinds and amounts of life insurance that are right for you and your family.

Disability Insurance: Important Protection If You Cannot Work

A long-term disability policy is activated, replacing a portion of your lost income, when you are unable to work for an extended period. Employers cover approximately 40% of all workers with some form of company-paid disability insurance. If you buy it on your own, you may have to pay up to 40 cents per $100 of monthly coverage.

If you’re buying, you should generally try to get a noncancelable policy with benefits for life, or at least to age 65, and as much salary coverage as you can afford. Insurers will generally cover up to 65% of your salary. Generally, you should have total coverage equal to two-thirds of your current pre-tax income.

If your company provides disability insurance, check to see whether it’s enough for your needs. Group disability insurance policies may be capped at six months and provide benefits that won’t cover your expenses.

Health Insurance: Available Through Your Employer Or Privately

Most people enjoy medical insurance as an employee benefit, often with their employers paying all or part of the premiums. Many employers offer a choice between HMOs (health maintenance organizations) and traditional fee-for-service care. Rates for HMOs are usually cheaper but have more constraints. Privately purchased health insurance is much more expensive — often by several hundred dollars a month — depending on such things as deductibles, coverage choices, and location.

Long-Term Care Insurance: Don’t Rely Solely On Government Programs

With an aging population and uncertainty about the future of Social Security, insurance to cover the high cost of nursing home or at-home health care is the focus of increased concern. Medicare pays very little of the cost of long-term care in the United States. Medicaid will pay for the care, but only for patients who meet strict income eligibility requirements.  With Congress always debating the future funding of these programs, financial planning for long-term care is more crucial than ever.

So-called  Medigap insurance can help pay medical expenses of the elderly not covered by the Medicare system, including long-term hospital care. But Medigap policies are expensive and complex. And, it doesn't cover custodial nursing home costs. In fact, about half of all nursing home residents pay for the care with personal savings, according to Medicare.

Senior organizations, such as the AARP (formerly known as the American Association of Retired Persons), can provide information on long-term care insurance. Insurance policies contain exclusions, limitations, reductions of benefits, and terms for keeping them in force.

Because your financial professional understands your needs as well as the role of the various kinds of insurance within an individual financial picture, he or she can help you with the policies that are most appropriate for you. Your financial professional can provide you with costs and complete details.

Points To Remember

• Your insurance needs will vary based on your family, age, and economic situation.
• Anyone who owns a car should have auto liability insurance. Collision, fire, and theft can protect your investment in a valuable car.
• Homeowner’s insurance should generally provide coverage up to 80% of the cost of replacing your home, minus land and foundation. Homeowners should also have liability coverage, and those with considerable assets may want to purchase liability up to $1 million.
• Life insurance can be an especially important financial tool that has many uses, the most important of which is protecting your family.

• Long-term care insurance may be a necessity for older people, because the long-term coverage of Medicaid and Medicare is often inadequate

I can help secure your future with a complimentary insurance and financial review.