Evaluating Your Needs vs. Costs on Policies Insurers Like to Push
Most of us want to feel secure and protected in the event of a crisis. But with insurance, you need to take steps to ensure that you do not overpay for services that simply are not needed or greatly overlap one another. The key is to only insure against what truly needs coverage and only up to amounts that you actually need. Then you’ll be in a position to shop for the best coverage for the fewest dollars possible.
Your insurance needs depend on where you are in life – your age, marital status, living parents, children, etc. For example, if you’re in your 20s with no spouse or children, you probably don’t need life insurance. On the flip side, if you’re married with dependent children, you would certainly want to make sure that your policy is sufficient to take care of the family in the event of your passing.
Consider consulting with an independent financial advisor who can review all your policies to ensure:
- You are not paying for the same coverage through overlapping policies.
- There are no dangerous gaps in your insur- ance policies.
- You have adequate umbrella insurance to provide additional coverage in the event any of your existing policies have payment limitations you could exceed.
High-Cost Specialty Policies
You Probably Don’t Need
Beware of highly specialized insurance policies. For example, if you fear losing your home due to unemployment, then mortgage life insurance can be quite tempting because supposedly with that cover- age you can lose your job and still keep your home. Yet this insurance premium is for most people almost the same thing as throwing hard earned money into the trash!
Essentially, this policy promises to pay one’s mortgage payment in the event that the policy holder becomes disabled or dies. If you do not have any dependants or a spouse, then this insurance is probably worthless for you, since no one would be responsible for your mortgage payment upon your death. Furthermore, a standard life insurance policy provides benefits that can be used to pay for the mortgage.
Why purchase mortgage life insurance and pay that additional premium? If you really want additional coverage, you can simply increase the amount of coverage you have on your current life insurance policy for less cost and hassle.
What about traveler’s insurance? The best way to determine if traveler’s policies are just another expensive way to feel good is to call your respec- tive health and life insurance policy providers to determine coverage benefits in the event of an accident during your travels. Most likely you are already protected. Also, the credit card company that you use to book your travel arrangements typically already provides some basic coverage.
Long-term Care Planning Is a Necessity – But Insurance, Not Necessarily
Long-term care isn’t covered by standard health insurance or Medicare and is difficult to qualify for in a rudimentary form under Medicaid. That makes long-term care considerations an important part of retirement planning. Yet it’s often overlooked. Many wrongly assume they are already covered, or that they’ll be able to afford nursing home expenses on their own, or that their children will take care of them. Sadly, those assumptions will, for a lot of people, turn out to be wrong.
Insurance may not be the right planning solution for you. But by weighing your options now, you have at least put an important planning matter on the table.
Long-term care is for those who no longer have the ability to live independently and need medical assistance every day. And despite all the expensive new coverage promised to millions of people under Obamacare, the (Un)Affordable Care Act doesn’t mandate coverage for most long-term care needs. Long-term care insurers will only issue policies to those in relatively good health. That puts urgency on signing up. Most people start long-term care planning between ages 52 and 64.
Some 92% of all long-term care cases only need about 3 years coverage. Don’t let the insurance company sell you 6 years without giving it plenty of thought. Other issues to consider:
- Make sure the insurance company you are considering is financially sound.
- Ask about the deductible and elimination period (the amount of time before you receive care until the benefits begin).
- Build in at least a 3% inflation protection into your policy – 5% would be better, though even that may be insufficient. If medical inflation takes off in an even bigger way than it already is, and your policy fails to keep up with it, your premium payments could represent a bad investment.
Long-term care insurance may or may not be right for you. But it’s never too early (or too late) to develop a plan of some sort for dealing with this potential financial burden.