Many do not generally relate insurance to financial planning, it can have a huge effect on your financial well-being. Insurance plays a huge role in your overall financial picture and it is extremely important to make sure you are not only covered, but that the amount of coverage fits your individualized needs. While insurance can feel like an unnecessary expense at times when you don’t utilize it, it can be life-changing when you do need it. In this blog, we are going to discuss a few common types of insurance and some key components to keep in mind when evaluating your insurance.
Property insurance is one of the most common coverages, as this generally consists of automobile, homeowners, boat, or motorcycle insurance. Most individuals know they need to have insurance coverage for legal purposes, but not everyone truly understands how to properly evaluate an adequate amount of coverage. The goal should not be to pay as little as possible each month. The goal should be to have an adequate amount of coverage should something happen. These types of insurances should be reviewed every few years to ensure the amount of coverage is still sufficient. Especially today, it can even be useful to shop this year to year to ensure you are paying the lowest rates. One thing to keep in mind regarding homeowners insurance is if upgrades have been made to your home. If that’s the case, then the coverage should likely be increased. For auto insurance, if you are driving a 10 year old vehicle and still paying the same amount as when you bought it, it is likely time to shop rates and potentially switch providers.
Personal Umbrella Coverage, also sometimes referred to as a PUP can be one of the most important types of insurance. Especially for those with a high net worth or a lot to lose, this can be crucial if something were to happen. The purpose of umbrella coverage is to cover any excess liability that your regular insurance does not. An example of umbrella coverage in play is if you were driving in a parking lot and you hit someone that popped out from around the corner. While you didn’t see them, you can potentially be sued for their health costs, future income if they are now unable to work, emotional damages from the injury, etc. If your car insurance only covers half a million in liability, your umbrella could come in to cover any additional amount that you might be sued. For that reason, make sure your umbrella is pretty close to covering your overall net worth.
Life Insurance serves as a means to help your loved ones cover expenses after you have passed away. This type of coverage may not be needed for everyone, but is often a helpful way for cash to be available shortly after your passing as this is entirely outside of your estate. One good idea regarding life insurance is to cover any lost income from someone passing or to potentially cover the debts owed at the time. While you might not have to worry about this if you are the one who passes, make sure your loved ones are prepared and able to continue living comfortably. For those who have a high net worth, the added expense of paying into this coverage is probably not necessary, as there are already enough funds available to cover any debts.
Health insurance can be costly, but is really an unavoidable expense. When researching your plans, take into account your current health, family health history, and your lifestyle. If you work in a hospital, you may be more likely to get sick than if you work at home. This can also be a big consideration when people are thinking about retirement. While it would be great to retire at 55, health insurance can be extremely expensive when you are paying for it out of pocket, especially for 10 years in this case before you are eligible for Medicare. When you do hit that magical age of 65, you may also want to consider additional insurance to provide more coverage. These types of insurance are called Medigap and Medicare advantage plans.
