Marriage, child, house, another child. Life was certainly simpler before I got married (but not better). At each stage in life, you should re-evaluate your insurance needs. Unfortunately, bad things can happen, and insurance makes sure they don’t destroy your life. As you get older, life changes, and so should your insurance.
- Choosing an Insurance Company
- A Tale of Two Insurance Companies
- Auto Insurance
- Health Insurance
- Life Insurance
- Property Insurance
- Umbrella Policy
- Disability Insurance
- Long-Term Care
Choosing an Insurance Company
Most people buy insurance like they buy anything else; they focus on price. Though the cost of insurance is important, I feel strongly that choosing a highly rated insurance company may be more important. However, there are steps you can take to reduce your costs and get the best service out of your insurance company.
A highly rated company will make your life easier when dealing with claims, payments, and non-claim problems.
Price Isn’t Everything
I would rather pay a little more for a highly rated company and know they are there when I need them.
Many insurance companies handle different types of insurance. If you can bundle all your policies with one company, they will usually offer a discount.
Higher Deductibles Can Lower Your Premium.
Your deductible is how much you pay for a claim before the insurance company starts to pay. For example, if your car gets scratched and requires $2500 of repairs, and you have a $3000 deductible, that means you will pay 100% of the repair. A $1,000 deductible means the insurance company would pay $1,500, with you picking up the first $1,000.
Almost all forms of insurance have have a deductible.
A Tale of Two Insurance Companies
When my daughter was one, I was involved in a fender bender that didn’t bend any fenders. Turns out the so-called victim had a history of fraudulent insurance claims. My insurance company, which is not the cheapest but highly rated, hired a top attorney to handle the case for us. The attorney kept us in the loop every step of the way and provided us with white-glove service. Eventually, they settled with the victim for a few thousand dollars. We didn’t have to get involved at all. The lawyer handled everything and our insurance rates did not go up one cent.
Years later my mother got into a car accident and totaled her car. She has a history of choosing the cheapest insurance provider and we regretted it immediately. For months we had to call and email them to get her claim settled. It was tons of work and incredibly frustrating. When she got a new car, she chose a better insurance company.
Now that we’ve covered the basics, let’s go over the seven (7) types you should consider:
The first type of insurance I ever purchased was Auto Insurance when I was about 20 years old. Auto liability coverage is mandatory in most states, but of course, there are other coverage options you should consider to help protect you, your passengers, and your vehicle if you’re involved in a car accident or your car is stolen. Additionally, some companies include roadside assistance in your policy so make sure to ask about that.
This is the only part of your auto insurance that’s mandatory because it protects others from you. It’s usually divided into two components; Bodily Injury Liability is designed to help pay for another person’s injuries, and Property Damage Liability will help pay for damage of another person’s property if you cause the accident.
Not all auto insurance focuses on driving. Comprehensive protects you from situations like theft, fire or vandalism.
If you’re involved in a car accident or hit a stationary object like a fence, collision coverage would pay to repair or replace your car.
Uninsured and Underinsured Motorist Coverage
This covers you in case you are hit by a driver that has no insurance (uninsured) or doesn’t have enough insurance (underinsured) to cover your claim.
Medical Payments Coverage
Injuries to you, your passengers or family members driving the insured vehicle are covered with Medical Payments Coverage and may include hospital visits, X-rays, surgery and more.
Personal Injury Protection (PIP)
Similar to Medical Payments Coverage, this will help pay for your medical expenses after an accident. In addition, it may also help cover expenses incurred because of your injuries like child care expenses or lost income.
At 26 years old ( in 2021 ), you can no longer be covered by your parent’s health insurance and need to get your own. Please don’t think because you are young and healthy that you don’t need some type of Health Insurance. A serious illness or accident can affect you at any age, and doctor bills add up quickly.
Unfortunately, Health Insurance is not cheap. You can increase your deductibles and your co-pay, which will help a bit, but honestly, it’s still going to cost a lot. And if you have a family, the cost can be shocking.
The least expensive option, and probably the best, is participating in your employer’s insurance program. Most companies will split the cost with you and it should be cheaper than going at it alone. In 2020, the average annual premiums for employer-sponsored health insurance are $7,470 for single coverage and $21,342 for family coverage according to research published by the Kaiser Family Foundation.
If you are not employed or don’t have health insurance through your employer check with trade organizations and associations about group health coverage. Here are a few to get you started: AARP Health, Alliance for Affordable Services, National Association of Female Executives, Small Business Service Bureau, Writers Guild of America, and Freelancers Union.
Once I got married and my spouse was relying on my salary, and me, hers, we decided to get life insurance. There are many types and it can get confusing, including using part of your insurance as an investment. We’ll cover some basics here, but if you still need more information you can read our post “Life Insurance: Protect Your Family From Financial Burden“.
This is the simplest type of life insurance. It’s just insurance. No investment here. You’re covered for a set period of time, like 20 years. In my opinion, simple is the best choice.
This is similar to Term life, but instead of purchasing for a set period of time (a “term”), you purchase the policy to cover your “whole life” and your premiums remain the same throughout the life of the policy. However, this is not pure life insurance and the company will invest a portion of your premiums and you will receive a relatively low guaranteed rate of return. This is mixing insurance with an investment, and I don’t recommend it. It’s more expensive then Term Life and by investing the difference you can do better than their measly return.
Universal, Variable, and Universal Variable
Universal, Variable, and Universal Variable provide both a death benefit and a cash value account; that’s why they are sometimes called “cash value policies”. They are more expensive than Term Life because they fund a savings account in addition to buying insurance. This savings account is similar to a mutual fund and includes various investments. As the investments grow, so does. your cash value. If the investments drop, well, so does your cash value.
Once married we rented our first apartment together, then saved and bought a house, buying the proper Property Insurance along the way. We were protected from damage or theft when we rented and when we purchased. Insurance also protected us if someone got injured on our property. This could be a friend or a stranger, and it happens all the time.
When I was younger and living with my parents, someone walked past our house, tripped over a crack in the sidewalk, and fell. They sued my parents and won. Luckily, we had Property Insurance and were protected.
Once you get approved for a home mortgage, your lender will ask you to provide them with proof of Homeowners Insurance. Lenders require homeowners insurance because they loaned you money and want to make sure that your property is fully covered against catastrophic damage and that you are financially capable of paying back the mortgage if your home is destroyed.
For Renters As Well
When we rented, we had Renters Insurance. It protected us if our apartment got robbed, items were lost in a fire, and more. I find that many renters don’t think about Renters Insurance, don’t be one of those.
In the previous section of this article, “A Tale of Two Insurance Companies”, I mentioned being sued for a fender bender. Though our insurance company provided us with a great lawyer, I was still worried about the lawsuit which was for $1,000,000. Our Auto Insurance had the standard $300,000 coverage for Bodily Injury Liability so we would be on the line for the remaining $700,000. That’s where an Umbrella Policy comes in.
Umbrella insurance protects you beyond the existing limits and coverages of your other policies. It can provide coverage for injuries, property damage, personal liability situations, and certain lawsuits. Additionally, it provides coverage for claims that may be excluded by your other liability policies like false arrest, libel, and slander.
It generally does not cover your injuries or damage to your personal property, a criminal or intentional action causing damage to someone else, or liability you assume under a contract.
One of the things I really love about Umbrella Insurance is that it’s inexpensive compared to other forms of insurance. Usually, $100-$200 a year for $1,000,000 of coverage. It’s the best bargain in the insurance world!
You might think you don’t need Umbrella Insurance, but here are a few scenarios where it would come in handy in case you get sued:
- Your child just started driving and is prone to accidents.
- You or your child get into a fight and hurt another person.
- Your dog bites someone.
- You throw a party and some guests develop food poisoning.
Umbrella Insurance allows us to sleep better at night.
The same way Life Insurance protects your family if you become deceased, Disability Insurance protects you and your family if you can no longer work. When you die, you no longer need income because you have no living expenses. But if you become disabled, you still have living expenses and are unable to work.
If you’re an employee then your company probably has a short-term plan. You should find out how long you’re covered for and when it kicks in. Some plans don’t start until 90 days after you apply for benefits. Also, remember that once you leave your job you are no longer covered.
If you’re self-employed, then Disability Insurance is a must-have. My friend is a computer programmer and gets carpal tunnel syndrome every few months. So far, he’s been able to work through it, but if the time comes where it gets too painful, his Disability Insurance will take care of him and his family.
If you’re employed then Workers’ compensation is being handled by your employer. However, Workers’ Compensation only covers you if you become disabled at work. Even a car accident, unless you are driving for your job, would not be covered. Disability Insurance covers you everywhere.
For most of us, there will come a time when we require long-term care like a nursing home. Depending on where you live nursing home costs can be over $100,000 a year and they are not going down. Unless you have a very high net worth, a nursing home can seriously eat into your retirement savings. In some cases both you and your spouse might need care so that expense will double.
As I mentioned, high net worth individuals probably don’t need to worry about Long-Term Care Insurance, and neither do those with little or no net worth. If you have limited savings then you qualify for Medicaid which means the government will cover your nursing home costs.
If you fall in the middle then you should seriously consider Long-Term Care, and you should consider it before you are 60 years of age. The older you get the higher your premiums will be.
As you can see different stages of life require different types of insurance. I hope this helps.