*This post highlights Chapter 7 from Mike’s book, Achieving Financial Fulfillment.
Some insurance coverages are very common and even required, such as automobile and homeowners insurance, while the purpose of others are less universally understood, such as disability, life, and long-term care insurance. No matter the type, proper insurance coverage can help protect your assets or your income at various stages of life.
Automobile Insurance
It’s common knowledge that if your car gets damaged in an accident, your insurance company will typically pay for the costs of repairing the vehicle and your responsibility is to pay the deductible. Deductible amounts usually range from $250 to $2,000 per covered occurrence. Generally, the lower the deductible, the higher the auto insurance rates you pay in premiums. This is because the insurance company will need to pay out more if you make a claim and have a lower deductible. For example, say you have an accident that leads to $4,000 in damages to your car. If you have collision insurance with a $500 deductible, your car insurance claim payout would be $3,500. If you instead had a $2,000 deductible, your insurance company would only pay out $2,000 on the same claim.
According to a Forbes Advisor analysis of car insurance deductibles and rates, drivers who increase their deductibles can save an average of 7% to 28% each year. They go on to state that the biggest savings are typically available to drivers who make a substantial change to their deductible, such as jumping from $250 to $2,000, but you should consider what amount feels most comfortable to you. The amount you save primarily depends on your current deductible, your new deductible, and your auto insurance company.
Homeowners Insurance
Similar to auto insurance, homeowners insurance (and renters insurance) can provide essential coverage for property damage as well as injuries to people and personal liability. Changing your deductible does not have quite as dramatic of an effect on premiums as with auto coverage, but as many commercials suggest, bundling home and auto together with the same company can save you on premium costs. Also, umbrella liability insurance should be considered as you accumulate assets because it provides coverage beyond the limits of your other insurance policies. It can include additional liability coverage for injuries, damage to property, certain lawsuits, and personal liability situations.
Life Insurance
Life insurance typically provides a tax-free payout that can be used to cover bills and expenses and potentially replace the lost income from a wage earner who passes away prematurely. Many people first consider it when they experience a major life event, such as getting married, starting a family or buying a new home.
The two major types of life insurance are term and whole life. As the names imply, term policies cover only a specific number of years (the term) and whole life coverage can be for a lifetime. Term life provides a guaranteed death benefit for the term you choose, and your payments remain level for the length of the term. It is also more affordable than whole life policies and is sufficient to cover the vast majority of life insurance needs. Whole life insurance provides features beyond a simple death benefit, including the build-up of cash value, and potential access to policy loans. Of course, with these additional features comes higher premiums for the same level of insurance coverage than a comparable term policy.
Disability Insurance
Will money be available if the main wage earner or earners in a family become disabled? Disability insurance can cover this need and also has two major types: short-term and long-term. Short-term disability insurance is beneficial for situations in which an employee is injured and can return to work, whereas long-term disability helps those who will be out of work for a long time or even permanently. As you might imagine, short-term benefits begin more quickly, don’t last as long, and typically cover a higher percentage of the lost income, as compared to benefits from long-term disability insurance policies.
Health Insurance
Many employers provide health insurance to their employees as a standard part of their compensation and benefits package. Self-employed individuals and those without coverage can access insurance through the federal Healthcare Marketplace. Plans available through the Marketplace can be available with a premium credit (cost savings) that is based on your annual income. Medicare health insurance coverage is generally available at age 65 for many Americans.
Long-Term Care Insurance
A long-term care insurance policy covers services that aren’t covered by regular health insurance. These services can include help with bathing, dressing, or getting in and out of bed and may be provided at a nursing home or an assisted living facility. Whether long-term care insurance is the right choice depends on your situation and preferences. Long-term care insurance should be considered in your 50s to mid-60s because you may not qualify for long-term care insurance if you develop a debilitating condition.
https://www.forbes.com/advisor/ car-insurance/savings-by-raising-car-insurance-deductible/