Ensure your Efforts with Insurance

    How Healthy Are Your Finances Series- Part 8

    Brittney Castro, CA Insurance License #0F33895

    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 becomes another area that you should review on a regular basis.    Remember, as much as you may dislike it, insurance will be the glue that holds everything together when unexpected events occur.

    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 post.

    1. Disability Insurance On your journey toward financial independence it is crucial to protect one of your most significant financial assets– YOU! You’re ability to earn an income is what funds your life and allows you to save for your goals.  Simply stated, disability insurance protects your income.  It pays you a benefit if you become too sick or injured to work.  While most people think they will never get too sick or injured to go to work, according to the Social Security Administration, just over 1 in 4 of today’s 20 year olds will become disabled before reaching age 67.  Yet, over 67% of the private sector workforce has no long-term disability insurance!  In general, disability insurance policies usually replace about 60 percent of your annual earnings for a specific period time (2 years, 5 years, to age 65).  Some employers offer a group disability insurance plan to their employees at no cost or at a partial cost to the employee.  If you are not covered by a group disability insurance plan, you should review your individual disability insurance options.  Typically individual disability insurance on average costs between 1 and 3 percent of your annual income.
    2. Life InsuranceIn my opinion, its simple– 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 as you progress through different life stages (i.e. become a homeowner, start a family, approach retirement), because your life insurance needs will change throughout your lifetime.  Typically, you should purchase enough life insurance to provide your surviving dependents with either an income stream or lump sum to replace your income, cover their lifestyle expenses, and allow them to continue to save for their financial goals.  Parents who stay home and care for the children also need life insurance.  Even though the stay home parent does not make an income, childcare is expensive and needs to be taken into consideration.  Life insurance can provide the surviving spouse the flexibility to work part time to care for the kids or hire full time childcare.  Either way, both 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.”
    3. Long term care insurance With life expectancies rising, more and more people will find themselves needing some sort of long term care during their lifetime.  Currently, the life expectancy of a 65-year-old is almost 20 years.   Long term care insurance provides a benefit to help individuals pay for either in-home care or care in a long term care facility.  With the average cost of a private room in a nursing home facility in California being about $91,250 per year in 2011, 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 days in a skilled nursing home, after that the rest is paid by you.  For more information on Medicare, visit their website at www.medicare.gov.  If you have parents who are in their 50 and 60’s you may want to look into long term care insurance for them.  If they need care later in life, you may be the one who has to care for them– an emotional, physical and financial responsibility.

    Financially Wise Women Quick Tip:

    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 key part in your financial plan.  Buying insurance helps shift some of the risk to the insurance company and helps protect your financial foundation.
    2. Make sure to take advantage of the insurances offered through your employer.  The group plans offered by your employer are usually easy to qualify for and cheaper to you as your employer may help cover some of the cost of the insurance premium.
    3. Make sure you understand the types of insurance coverage you currently have and what your insurance needs are.  Work with an insurance professional to identify any gaps in your insurance coverage.

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

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