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.
Homeowners insurance.
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 insurance.
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 companies.
Health 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 levels coverage you need, but
make sure you are covered for major medical expenses.
Disability insurance.
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 how
long.
Life insurance.
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 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.
Deductibles.
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.
