Do you feel confident with how you and your loved ones are covered in case of emergencies? Think of things like having an emergency fund, appropriate insurance coverage, and how your assets (home, accounts, etc) would be passed down if you were to pass away today. In other words, do you have a risk management plan?
Insurance is a key part of risk management. When purchasing insurance it’s important to understand what you’re buying, know how much coverage you need and to shop around for the best prices.
Insurance: People
Term life insurance
This provides a payout at your death. You can buy it individually, although often the most affordable way is to do it through your employer or some other type of group coverage.
Once you get approved for it and purchase it, you are covered until it dies (aka when the term ends). When you have dependents (think kids under 18 or 25 depending on the babe, as well as beloved pets) you can set them up to have a financial cushion if you die before they can care for themselves.
While term life insurance is set it and forget it while the term is active, do keep in mind that you can add/end term life insurance as you gain/loose dependents. In other words, once you know your due date for your new baby it’s time to add more term life insurance.
Additional Resources:
Health, vision, and dental insurance
Most people have health insurance through their employer or government Medicaid services. Employer provided health insurance is often the most affordable because you buy it as part of a group. Otherwise you can buy health insurance coverage through your state’s marketplace.
A really important thing to consider when looking at health insurance is to decide how much coverage you need and what the different price points are.
With any type of health insurance you pay a monthly fee to have access to care. When you do use the care you’ll usually have a fee. Either as part of the overall deductible or coinsurance fee. Depending on your health and whether you see anything coming up like a surgery or pregnancy, you can change your coverage to better fit your situation.
To learn more about these terms, check out this article by Joanna Lahey, an associate professor of economics at the George H.W. Bush School of Government and Public Service at Texas A&M University and the National Bureau of Economic Research – Insurance: Share the Risk.
Insurance: Earnings
Disability Insurance
Disability insurance is really important and people often don’t think about it. In the event of a disability, this insurance will often cover up to 60% of your full salary. Again, people often get this through employers, although you can purchase disability insurance on your own as a self-employed person. They will look at your previous years income and they’ll also look at projections for this year’s income to see what 60% of that total amount would be.
Whereas health insurance, including dental and vision, have a deductible that you need to pay before getting coverage, with disability insurance they have what is called an elimination period. This is the number of days you need to be unable to work in order for the insurance to start paying you. Short term disability coverage usually starts after a week, while long term coverage often has a 90 day waiting period.
This coverage has a couple of key definitions:
- Own occupation – This focuses on whether you are able to do the same exact job you were doing before. If you are a highly skilled surgeon, you’d receive benefits until you could return to your original position.
- Any occupation – This definition is much broader and includes any type of paid employment. In the example before, if the surgeon could work as a at home care aid they would not be eligible to receive any type of benefits.
Additional resources:
Business Insurances
For business owners there are additional types of insurance available.
- Errors and omissions
- Malpractice
- General business
A great source of information for this is the Small Business Association.
Insurance: Things
The three most common are:
- Auto – This covers you, your car, bystanders, passengers, and property in the event of a car accident.
- Homeowner’s or Renter’s – This covers any accidents in your home, and even personal property when you’re away from home.
- Umbrella – This covers your personal wealth in the case of an accident where you are sued for more than what your other property insurance covers. This is an add on to homeowner’s, renter’s, or auto insurance.
Personal Property Insurance
Let’s say you buy renter’s insurance after checking prices and considering what kind of coverage you need. But then it’s been a couple of years, and you’ve upgraded your furniture from your grandma’s hand-me-downs to much nicer pieces that you need to protect from your cat.
At that point, your previous personal property coverage needs to be upgraded to “replacement value” – meaning that if there’s a fire or some other type of event the insurance company will pay you what it will cost to replace said furniture with a new item. This compares to “actual cash value” where the insurance company would pay you what someone might pay for said item at a garage sale. This is fine when your furniture was purchased at a garage sale, but at some point this may not be the right coverage for you.
Additional Resources
This article is a very BRIEF overview of the different types of insurances out there and there is a wealth of information available. The best way to get your questions answered is to call an agent and learn more about what’s needed. Consider worst case scenarios and what you would need to care for yourself at those points.
As always, if you have any questions please reach out at diana@allthecolors.net.
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Very succinct and informative. Thanks for sharing.
Thank you Dr. Bryan!!