Give yourself a Gift for the Holiday Season-Review your insurance needs

     

    Insurance is used as one way to protect ourselves, our loved ones and the things we own against unexpected events that happen in life.  As you work on building your financial foundation and getting your finances in shape, your insurance coverage just becomes another area that you should review on a regular basis.

    Insurance is a contract between you and an insurance company.  While there many types of insurances you may need as you progress through different life stages, I will only focus on a few in this article.

    Disability Insurance-

    Simply stated disability insurance protects your income.  People think of disability insurance as a waste of money because they never think anything bad will happen to them to keep them out of work for an extended period of time.  However, according to the Social Security Administration, just over 1 in 4 of today’s 20 year-olds will become disabled before reaching age 67! 1  And, 67% of the private sector workforce has no long-term disability insurance.

    As you move toward financial independence it is crucial you protect one of your most significant financial assets, YOU! You’re ability to earn an income is what funds your current lifestyle and allows you to save for your goals.  Without it, you may destroy everything you have worked so hard to build and save. Disability insurance will pay you a benefit (income) if you become too sick (i.e. severe illness, cancer) or injured (i.e. break you leg, back injury) to go to work.  In general, disability insurance policies usually replace about 60% of your annual earnings for a specific period time (2 years, 5 years, to age 65).  Some employers offer group disability insurance coverage as a benefit.  If you are not covered by your employer or self-employed, you should look into individual disability insurance, which on average should cost between 1 and 3 percent of your annual income.

    Life Insurance-

    My motto- if your love someone or owe someone you need life insurance.

    Why?  Because your debts don’t die when you die and more importantly you want to make sure your loved ones are taken care of financially should something happen to you.  It makes sense to review your life insurance needs on a regular basis to ensure  you are adequately covered for your current financial situation and financial goals you’re saving for.  Usually you will want to get enough in life insurance to leave your family with enough money to cover the bills, and replace your income if you were no longer here.  If you have kids or other dependents, life insurance will provide your survivors with an income stream or lump sum to replace your income.

    Also, for all you parents out there who stay home and care for the children, even though you are not working, you still may need life  insurance.  If something happens to you, who is going to stay home and take care of the kids?  Your surviving spouse can decide to stop working to care for the kids or  hire childcare  and continue working, but either way, both of these options require money.  Since there are many types of life insurances out there, it is wise to do your homework and understand the basics of the different types of life insurance.   For more information on the different types of life insurance, check out the article on Investopedia “Intro to insurance: Types of Life Insurance.”

     

    Long term care insurance-

    In 1940, the life expectancy of a 65-year-old was almost 14 years; today it’s almost 20 years. With life expectancies rising, more and more people will find themselves needing some sort of long term care.  Long term care insurance provides assistance to people who are in need of either in-home care or a long term care facility.

    The average cost of a private room in a nursing home facility in California for 2011 is about $91,250 per year! 3  With the costs of long term care increasing at about 7% annually, you can see why individuals of all ages are starting to heavily consider this type of insurance.  Keep in mind that while some think Medicare covers long term care costs, Medicare only pays a portion of the first 100 in a skilled nursing home, the rest is paid by you.  For more information on Medicare, visit their website at www.medicare.gov. 4 If you have parents who are in their 50 and 60’s you may want to look into long term care insurance with them as if they needed care later in life, you may be the one who has to care for them, an emotional, physical and financial responsibility.

    Here are some quick tips to help you get some of your insurance needs in shape:

    1. Review your insurance coverage today.  Protection planning is a key part in your financial plan as you want to protect yourself against the unexpected events in life.  Buying insurance helps shift some of the risk to an insurance company and help[s protect your financial foundation.
    2.  Make sure to take advantage of the insurances offered through your employer.  These are usually easier to qualify for and cheaper to you since the policies underwrite a large group of people, helping the insurance company minimize its risk therefore keep the cots down.
    3. Make sure you understand the types of insurance policies you currently have and what your insurance needs are.  Work with an insurance professional to identify any gaps in your insurance policies.
    4. Review your insurance policies regularly- just like any other financial strategy, you’ll want to make sure you review your insurance needs on a regular basis and make any necessary changes or amendments to your insurance coverage as you progress through different life stages.

    For further information I invite you to check out my Financially Wise Women Ebook or contact me directly at Brittney.castro@Lpl.com

    Sources and Links:

    1. Social Security Administration-Basic Fact Sheet- May 17, 2011-http://www.ssa.gov/pressoffice/basicfact.htm
    2. http://www.investopedia.com/university/insurance/insurance8.asp#axzz1S1tAuGCw
    3. http://www.genworth.com/content/products/long_term_care/long_term_care/cost_of_care.html?WT.srch=1&WT.mc_id=ps_ltc_coc11_v1
    4. www.medicare.gov

     

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