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Fundamentals
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Related
articles
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Homeowners
and renters 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.
Renters insurance
works in a similar fashion. It covers your belongings and provides
some level of liability coverage if someone is injured in your apartment.
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Homeowners
and Renters Insurance
Inventory
Your Belongings
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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. However, insurance
companies will not pay more than the car is worth.
Auto liability
coverage 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.
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Understanding
Auto Insurance |
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Deductibles
Choosing a homeowners, renters, or auto 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.
Here is a chart
that can help you evaluate your deductibles:
| Insurance
Policy |
Current
premium |
Current
deductible |
Premium
with deductible of $500 |
Premium
with deductible of $1000 |
| Homeowners
or renters |
$ |
$ |
$ |
$ |
| Auto -
Collision coverage |
$ |
$ |
$ |
$ |
| Auto -
Comprehensive coverage |
$ |
$ |
$ |
$ |
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Review
Your Insurance Deductibles |
Umbrella
liability insurance.
Most homeowners, renters 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 for additional protection. These policies are usually
inexpensive (a few hundred dollars for over a million dollars coverage)
and are available from most insurance companies. |
Umbrella
Insurance Policies |
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. |
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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 coverage, talk to an insurance professional
or consider policies offered by any professional organization you
belong to. |
Disability
Insurance |
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. |
Long
Term Care Insurance |
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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. If you have
no dependents, you may not need life insurance at all. If you want
or need coverage, 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.
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Understanding
Life Insurance
Getting
the Life Insurance You Need
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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.
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