Eyes up Soldiers! Part of being a good steward of money is to mitigate risk. This is typically done with insurance. Certain things you should self-insure (with your emergency fund) for such as car maintenance, home repairs, and job loss. There are 8 types of insurance that cover many other areas you could be exposing yourself to. Look into getting the following coverages to avoid financial disaster.
- Health Insurance – As much as possible, select a plan which you can afford the monthly payments (premium) and make sure you can handle the deductible with your emergency fund. You can also save on healthcare costs by enrolling in an HSA (Health Savings Account) or FSA (Flexible Spending Account).
- Auto Insurance – You are required by law to have auto insurance. But more than that, the most important reason for auto insurance is to make sure you are covered at the time of an accident. If the accident is your fault, it is imperative that you have enough coverage to cover any bodily injury that may have occurred to the party you hit. You also want to make sure you have enough coverage to cover all needed repairs to the vehicle you hit. One of the most important coverages to have that people sometimes overlook is uninsured/underinsured motorist coverage. If you are in an accident that is not your fault and the person that hit you either does NOT HAVE insurance or does not have ENOUGH insurance to cover your damages, your uninsured/underinsured motorist coverage will come into action and cover any gap in coverage to make sure your medical needs are met along with your vehicle’s repair.
- Homeowners Insurance – The overall importance of having homeowners insurance is to cover your home and the contents inside. You want to make sure that if your home was damaged or completely destroyed due to a covered peril (Ex: wind/ hail/ fire) that you would be made whole again by having your home and contents replaced.
- Renters Insurance – The overall importance of having renters insurance is to cover your contents. Like a homeowners policy, if your contents were to be destroyed from any weather related occurrence, fire, or theft, you would receive full replacement cost of your contents excluding any depreciation. So, if you purchased an Apple MacBook Air for $1500 in 2015, you would get a check for $1500 rather than what the 2015 MacBook Air would cost today.
- Umbrella Policy – If you’ve got a decent net worth (~ $500,000) and/or a high exposure occupation, it’s good to add a policy like this. This type of coverage starts at a minimum of $1 million dollars in liability coverage. The sole purpose of this coverage is to make sure that if you are sued from an auto accident or liability claim and have exhausted all of the coverage available in your standard auto policy and homeowners policy, you can dip into your umbrella policy to cover the rest. It’s a security blanket to gain peace of mind knowing that in the worst case scenario, you will not run out of coverage.
- Long-Term Disability Insurance – Studies show that just over one in four of today’s 20-year-olds will become disabled before reaching age 67 (Social Security Administration). Get LTD to protect yourself from a loss of income if you’re unable to work due to illness or injury.
- Term Life Insurance – A general rule of thumb is to get 10-12x your income in coverage. The primary role of life insurance is income replacement for a deceased individual. It can also be used to help with burial/funeral expenses as well as leaving an inheritance to loved ones.
- Long-Term Care Insurance – Get this once you turn 60 years old. LTC helps protect the retirement savings you worked so hard for over the years by keeping things like nursing home costs and in-home care manageable.
- Identity Theft Protection – This is different from credit monitoring (FREE on Credit Karma/Credit Sesame). What you’re looking for is a policy that provides “restoration” services. Cleaning up identity theft is a messy process and you need an assigned agent looking into things and fighting on your behalf to get your life back to normal.
Soldiers, we’ve been armed with information to help us lower our financial risk. It’s up to us to do the due diligence and assess our insurance coverages. Action Plan: When is the last time you reviewed your insurance policies? Find a good independent agent that can thoroughly examine your coverages. Oorah!
*Special thanks to insurance agent Chelsea Huyge for clarity of insurance terminology.*