Making Sense of Insurance
To simplify what coverage is most important, I will divide the coverage types into two main categories: Financial Inconvenience, and Financial Disaster. Financial inconvenience coverage you can live without. It does not make this coverage bad, just not devastating to your loved ones. Financial disaster insurance is of far greater importance.
Financial Inconvenience Insurance
What is financial inconvenience insurance? Examples include $300 Coverage for a new pair of glasses and an extended warrantee on a toaster oven. Neither of these would wipe out the house hold if they had to be paid for directly. Even larger appliances or a cell phone could fall under this category. The loss might be hundreds of dollars to fix an item, or even a couple thousand. Definitely put a pinch on the house hold for a few months, but this reflects the importance and purpose of an emergency fund.
If not for liability coverage, a package policy on your car would fall under this category. Taking your deductible down from $700 to $200 saves you $500. This is the financial inconvenience part. Liability coverage on the same policy can be a million dollars or more. This falls into the financial disaster area. I would recommend that this type of coverage be thought of as financial disaster for this reason.
Please understand that financial inconvenience insurance is not bad. This is a personal decision. My experience is that many people will spend money to have financial inconvenience insurance, but come up short or have no crucial financial disaster coverage. The context I am sharing is for you to better understand what deserves your attention and money to protect.
Financial Disaster Insurance
One of the biggest losses you and your family could sustain is loss of income. Think of earning $50,000 per year for 30 years. That is a loss of $1,500,000 and would be catastrophic to the house hold. Your loss of income should be protected against surviving but unable to work and also in the event of death.
Disability insurance protects you if an event happens that you survive but no longer can work. With a long-term disability, not only is there a loss of income, but you can end up with additional expenses due to your disability.
Life insurance protects the house hold in the event of death. In this case the loss can include final expenses, legal, accounting, tax, debt, and loss of income. Life insurance should take into account many factors, even beyond the financial portion (estate planning).
Another type of insurance that is less popular is critical illness. Coverage is a lump sum paid if you survive a heart attack, stroke, cancer, etc. for 30 days. There can be a lengthy road to recovery that is not always covered under other insurances. The funds help to offset your health care costs, such as uninsured prescriptions and treatments, hotel, travel, time off work, home care, and modifications to your home or vehicle. The dollar amount can be less with this coverage as long as you are adequately protected with disability and life. Critical illness can be thought of as filling in the gaps left by traditional coverage.
Insurance can be complex. Our professional independent approach simplifies your insurance planning so that you can rest assured your family is protected.