Hints for matching your coverage to your lifestyle – and your needs.
The whole point of insurance is preparing for the unexpected: You don’t know you’ll need it until you do. So how do you make a reasonable plan for the coverage you (might) need?
Here are some ways you can help determine what insurance you need now, and how that’s likely to change in the future. In general, whatever your situation, it’s never going to be cheaper to buy insurance than it is right now – premiums for health and life tend to go up as you grow older.
Life insurance can be the most significant cornerstone of your coverage, designed as an investment that takes care of the people you care most about if the worst happens and you’re not around. First questions: Are you single or married? Or, asked another way: Are there people depending on you for some or all of their financial security? If there are, then a term life insurance policy makes the most sense, especially one that can offer a large enough benefit to cover your loved ones. On the other hand, if you and a spouse are each earning enough to support yourselves and you’ve got no dependents, then a smaller just-in-case policy makes more sense.
If you’re a single parent, a term life policy might be offered to you at a lower cost, making it easier to cover your family – in other words, it’s a better buy and can do more good for you and yours. At the other end of the scale, if you’re retired, your kids are out on their own, and you and your spouse have enough set aside for retirement, then a life insurance policy might be entirely surplus to your needs … with one exception. If you’re still paying down a mortgage or other long-term debts, then a permanent (rather than term) policy with a payout just large enough to settle those payments can be a prudent investment.
But life insurance isn’t the whole picture. Auto insurance is legally mandated for anyone who drives, and is something parents can look forward to on their children’s behalf. FSA (or flexible spending account) plans can be a good idea to pay for childcare and some medical expenses tax-free, setting money aside now to cover costs over a set period of time, usually a year.
If you own your own home, chances are your mortgage holder requires a homeowner’s policy. As well as covering damages to the home itself, these policies can protect the value of your belongings and also cover liability for injuries suffered on your property.
If you’re a renter, your landlord’s insurance will cover the building, but you should consider renter’s insurance to protect your belongings inside your home in case of fire, storm, or theft. It also provides a “loss of use” payout after a disaster renders your home unliveable for a long period of time – something that can be especially valuable for someone renting in a region that’s subject to hurricanes, wildfires, or earthquakes.
If you’ve got health insurance through an employer, chance are you’ve also got short-term disability insurance. This financial safety net provides you with a percentage of your salary in case you suffer an illness or injury that makes you unable to work for a certain period of time. A short-term policy helps, but the numbers say that for those who need the coverage, most will want the coverage of an optional long-term policy. Over 25% of 20-year-olds can expect to suffer a disabling illness or injury that puts them out of work for at least a year between now and the time they retire.
As one gets on in years, long-term care insurance becomes more important as a way to cover expenses for at-home care, assisted living, or care in a nursing home – expenses that over 50% of Americans will need at some point in their lives. Hybrid life and long-term care policies can do double-duty for some empty nesters. Medicare will help cover some costs for the retired, but only pays for limited care, leaving you or your family responsible for the difference. So-called “Medi-gap” policies specialize in covering the costs that Medicare doesn’t.
Different policies can protect you and your loved ones in different ways. Some can also protect your wealth and even serve as investment vehicles, offering returns as well as security. Your needs are unique to your situation, but a financial advisor can help guide you to the best options to suit all of your needs.
CONTACT our local advisors to talk about your insurance needs. We can guide you through a risk analysis and review your options.