Insuring yourself for the unexpected

Post on behalf of Thomas J. Ueberschaer PA on Monday October 1, 2012

thumbnail.jpgThere are few absolute rules in life but we try to prepare for the unexpected as much as we can.  One thing we have some controlover is the type and amount of insurance we should carry.  Ideally, you should carry four types of insurance: property/casualty; life; medical; and disability. Property/Casualty Insurance.  This type of insurance protects your home, autos and other property you own to ensure that they can be repaired or replaced.  The casualty insurance will protect you if you are at fault for causing the need for repair or replacement.  Another protective insurance you may want to consider is an umbrella liabilty policy.  An umbrella policy fills in the gaps for your homeowners and auto policies if their coverage is insufficient.  For example, if you have a $10,000 liability coverage on your auto insurance policy but you, unfortunately, are at fault in an auto accident that causes $30,000 worth of damage to another person’s property.  Your umbrella policy would take effefct and provide one more layer of liabilty protection.  An umbrella policy is relatively inexpensive when compared to most other types of liability insurance.

Life. Life insurance provides benefits for your loved ones when you pass on.  Term life insurance is typically the least expensive type of life insurance and can be purchase for various lengths of time.  Many people choose a term that will expire when they feel there children will be financially independent and their primary home mortgage is paid off. Whole life policies are another alternative.  These policies not only provide a payoff in case of death but also includes an investment portion.  The investment portion has a cash value which the policy holder can borrow against.  Typically the investment portion does not have historically high returns. The whole life policy has much higher premiums than term insurance and is sold as a forced savings plan. Life insurance is meant to replace your income for a certain period of time not be seen as a windfall. Medical. A medical emergency can be catastrophic to a family’s savings.  Almost 30% of bankruptcies are directly tied to unexpected health bills.  Take advantage of medical insurance if your employer provides it.  If possible add your spouse and dependents on the policy as well. With the 2010 Affordable Care Act, you may be able to insure your child until he/she reaches the age of 26. If you have recently lost your job, investigate the possibility of COBRA insurance which allows  you to continue medical insurance coverage with the employer for a certain period of time.  You may have to pay a higher premium than whne you were an employee but it still may be less expensive since you would still be part of a group insurance policy.  Medicaid, Medicare and Children’s Health Insurance Program (CHIP) have requirements for enrollment but are also options for medical insurance. Disability. Unlike life insurance, disability insurance protects you against another type of death, the death of your income.  A basic disability policy will replace some of your income should you be unable to work due to injury or illness. The last factor to protect yourself and your family is to have an emergency savings fund.  With an uncertain economy, people would be well-advised to keep a 3-6 month cushion of immediately accessible money to cover expenses due to unexpected emergencies.

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