Life Insurance: Not everyone needs life insurance. Life Insurance is designed to protect anyone who is financially dependent on you, in the event that you die. If you do not have any financial dependants you can use life insurance to pay funeral expenses and even cover debt in the event of your death. There are two basic types of life insurance, term and whole life.
- Term Life Insurance – Money from a term life insurance policy is granted only when you (the policyholder) die. This money is only available for a predetermined number of years, (5, 10, 15, or 20 years, or up to age 65). However, if you stop paying the premium, the insurance will stop as well. Premiums will go up as you age unless you purchase decreasing term insurance. Decreasing term insurance allows you to have premiums that do not change, but your coverage will lessen as you age.
- Whole Life Insurance – Premiums are determined by your age when you purchase the policy and will not change. This will guarantee your beneficiaries a predetermined amount of money at your death. Whole life insurance can act as a savings account, you can choose to have a cash value option that will grow over time and allow you to borrow that money.
- Universal Life Insurance – This gives you the option of having the protection of term insurance in addition to a cash value option through an investment program.
- Variable Life Insurance – This lets you actively participate in choosing which investments to include in your cash value option. Remember, you will experience gains as well as losses with any investment.
There are many things that go into deciding which type of life insurance will be right for you. Whole life policies have upfront charges, and some term policies are non renewable after age 70. You should consider how long will you need the coverage, and how much can you afford. Research different policies and talk with a trusted insurance agent.
Auto Insurance: It is very important to have proper coverage for your vehicle, and any drivers. Below are important aspects of auto insurance.
- Liability – This coverage will protect you in the event that you cause an accident, the insurance company will pay those who were involved. This is vital to auto insurance, but not the most expensive part. Liability coverage is defined by three numbers. Some companies require a minimum coverage such as 100/300/100, this represents what will be covered if you cause an accident.
- 100 = the amount of protection for each person injured
- 300 = the amount allowed per-person bodily injury
- 100 = the amount allowed per-accident property damage
- For example, in one accident $100,000 would be available for each person injured, $300,000 for each person who received any bodily injuries, and $100,000 for any property damage sustained in the accident. Each state has minimum requirements; you may want to consider increasing your coverage if you currently have only the minimum. You will be expected to cover whatever your insurance will not if you cause an accident.
- Collision and Comprehensive Coverage – Collision will cover any person driving your vehicle with permission, as well as your vehicle. Comprehensive will cover the vehicle as well as its contents. Limits for replacement would be the current cash value minus your deductible.
- If you have an older car, it may not be worth it to have collision and comprehensive coverage, especially if the car is not worth much more than your deductible. If you choose not to have collision and comprehensive coverage, your premiums will be lower.
- Making necessary coverage more affordable - There are many different ways to lessen the costs of auto insurance. Some examples are:
- Shop around, not all companies have the same rates
- Take advantage of discounts:
- Have auto and homeowners insurance from the same provider
- Good student discounts
- Maintain a good driving record
- Have good credit
- Increase your deductible when you choose to increase your coverage, this will lower your premiums.
- A deductible is the required dollar amount in your insurance policy that you must initially pay on any loss before insurance benefits can be received.
- A premium is a required fee that you must pay on a set basis (monthly or yearly) to keep your insurance coverage. Premiums assist in covering losses reported to the insurance company.
- *Accidents are not planned; make sure you are adequately covered!
Home or Renters Insurance: Anyone who is curently paying on a mortgage will be required to have homeowners insurance. Even when the mortgage is paid it is still wise to continue the insurnace. A home is a large investment and if faced with disaster, your insurance will aid in the replacement of your possessions and even your home if necessary. If you are curently a renter and do not have many possessions you may not need renters insurance. However, if you own items that you would consider devastating to lose you may want to consider renters insurance.
The following are important things to consider when choosing a home or renters insurance policy:
- First take an inventory of what you own – make a list of what you own, include style, model numbers, and how much the item cost. You may also consider taking individual pictures or video taping the items. You should only need to include major purchases on this list. In a disaster situation this list will help you as you make a claim to your insurance company. Remember to keep this list, video, or pictures at a location away from your home, for example, in a safety deposit box or with a family member.
Do you have any unusual but valuable possessions? - Now that you have taken an inventory of your possessions, do you have any valuables? If you do, they may not be fully covered under your insurance policy. You may want to consider increasing the coverage for those items. Depending on the increased coverage, your premium may go up, but typically not very much per billing period. If the cost of added coverage is too much for your budget you may want to consider increasing your deductible. This means in the event that something happens to your valuable, you will be responsible for more upfront before payment is made by the insurance company. Consider the personal value of this item; will it be worth it to you?
- Replacement cost coverage – This type of coverage will allow you to have any lost items replaced for the current price. Without this type of coverage you will only receive a portion of what it would take you to replace the item. Insurance typically only covers the current value of any insured item.
- Flood and Earthquake Insurance – A typical insurance policy will not include coverage for damage due to flood or earthquake. These types of insurances are more expensive, but it is up to you to determine if you need the coverage. If you live in a flood plain, flood insurance is required. If the nearby canal or river were to flood, your home and possessions would be covered with this insurance. If you live near a fault line, earthquake insurance is not required; but remember that earthquake damage is only covered with this specific insurance. It is up to you determine if you need this coverage.
Medical Insurance: Obtaining medical coverage through your employer will most likely be less expensive than a private provider. Many people who think they are healthy may not feel the need to have medical insurance. You might be able to cover simple doctor visits from time to time, but if you or a family member got really sick, could you afford the medication or possible surgery? Visit with your employer’s insurance representative to understand more about your health coverage and if it satisfies your needs.
If you find yourself in a financial situation where you cannot afford insurance for your children, or even for yourself, the following are some options available to lower income households.
- Medicaid – Apply in person or by mail through the State Health Department or Department of Workforce Services. Low income families, children, seniors, or the disabled may benefit from Medicaid. Medicaid is run by Federal and State guidelines. In general, most medical services and prescriptions are covered. Some programs even cover the premium under Part B Medicare (described below).
To be eligible for Medicaid you must meet your area program rules, be a U.S. citizen and meet the limits for income and assets. There are programs that offer emergency aid to those who are not U.S. citizens.
- Medicare – Apply through a local Social Security office during open enrollment.
There are two parts to Medicare:
- Part A acts as medical insurance to pay most costs of hospitalization, some inpatient care, and home health services. Those who qualify receive these benefits free of charge. There is a deductible for each coverage period.
- Part B acts as a supplementary medical insurance intended to cover doctor fees and many outpatient services. There is a monthly premium (exceptions apply to those who have a Medicare Cost Sharing Program or are actively involved with Medicaid). The deductible is $100 per year, the co-pay is 20 percent.
*Certain requirements must also be met. Some of them are:
- You must be 65 years old, a U.S. citizen, be eligible for Social Security benefits, or had employment through the government where Medicare coverage exists.
- If you are younger than 65 you may still qualify if you have been a recipient of Social Security disability at least two years, or if you have end-stage renal failure.
For more information on Medicaid and Medicare contact your local Department of Workforce Services or your State Health Department.
- Health Insurance Programs for your Children – Some states have insurance programs especially for children. Some typical requirements are: the children must be under 19, be U.S. citizens and not currently receiving health insurance coverage. There are also family income limits. Please call your State Health Department or local Department of Workforce Services to see if your state offers a health insurance program for children.
- Adult Health Insurance Programs – Your state may have an insurance program for qualifying adults. In general, these programs are not offered to those who qualify for Medicaid or Medicare, or already have insurance coverage. Income and age limits will apply. Contact your State Health Department or local Department of Workforce Services to see if your state offers a health insurance program for adults.
Cheaper health insurance through an employer – Health insurance may be cheaper if received through your employer. This may require increasing your hours or possibly switching jobs.
Umbrella Liability Insurance: This policy is for personal catastrophes. It protects against general and automobile liabilities. An umbrella policy will cover a broader range of losses and cover a much higher dollar amount than would be normally covered under homeowners, auto, and professional liability policies. You must first have basic coverage in order to be covered under an umbrella policy.
Read more about it:
When your income drops:
Financial Fitness Fact Sheets:
Financing Long-Term Care: Insurance and its Alternatives
Shopping for Long-Term Care Insurance
How to Protect Yourself from Insurance Fraud
Information Adapted from: The Financial Checkup by Alena Johnson Utah State University Lecturer; Take Charge of Your Money by Utah State University; Personal Finance Sixth Edition by E. Thomas Garmon and Raymond E. Forge; “Medicare or Medicaid?” brochure from the Utah State Department of Health and Utah’s Department of Workforce Services, April 2000