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Below we will discuss basic levels of insurance that you should not only be familiar with but should be a part of your mental framework when you are evaluating insurance products—whether for yourself and/or your family.
You must know all of the insurance products that can be of benefit to you and your family—and you must realize that it is your responsibility to put in place a plan that reflects that responsible use of your mind—to evaluate the need for—and actual selection of the appropriate insurance products—that are discussed below.
Key concerns are your liability limits and you want to at
least have the standard 100/300/100 coverage which means you have $100,000
coverage per person for bodily injury, including death that you cause to
others, $300,000 in bodily injury per accident and property damage up
$100,000. If you have a high net
worth—consider increasing the amount even higher.
You can do so by purchasing a personal umbrella policy that increases your liability limits even
Used in conjunction with your home or renters policies you can get coverage of a million dollars or more for $300 or so on an annual basis—possibly less.
Add several hundred more dollars and you can easily increase the amount to 3 or 4 million—which would provide you added comfort—particularly if you have a high net worth or high income.
It is also important that you know your medical payments or personal injury protection coverage on your policy.
The required coverage varies by state, but if you had the coverage—you would be protected if you had an accident and you had relatively small medical expenses for yourself and others who were injured in an accident—regardless of who was at fault!
Personal injury protection would normally cover lost wages, loss of services, and funeral expenses.
If you have a late model vehicle or one that is valued at a
high level—consider collision /comprehensive
coverage—that can cover damage to
your car that is not covered by the policy of the driver that hit you.
Comprehensive provides coverage for fire, flood, falling trees, hail, hurricane, or animal strikes—in many states.
Be sure you have a properly
funded emergency fund if you have a high deductible policy.
Even though you may lower your payments with a higher deductible policy—you still must have cash on hand to pay the deductible effectively—and in as stress-free a manner as possible.
In today’s economy be sure to get uninsured/under-insured motorist coverage at the level of your standard policy at a minimum—and increase that amount if you are a high earner—or have a high net worth. You will be protected in the event of a hit and run or if someone hits you and they do not have appropriate insurance coverage.
You must also realize that your credit score will play a role in the monthly premium that you will pay in virtually all states except California. Insurers have come to the conclusion that those drivers with lower credit scores get into more accidents.
In addition, your driving record (affects your insurance rate for life, health and auto) and your vehicles horsepower is a critical factor in determining your insurance premium.
In today's economy it is essential that you eliminate or reduce your debt in as effective a manner as possible—and you properly establish an emergency fund.
By doing "both" you are taking real action to "ensure" a prosperous and productive future for yourself and your family.
After paying off or paying down your debt—be sure not to repeat the debt cycle. Be sure to pay your credit purchases off in a timely manner (i.e. monthly) if at all possible.
By doing so consistently—you are protecting your future and preserving a way of life that you can pass on to your future generations.
Another key area of concern that you must address if you are in position too—is disability insurance as it can protect you from an unforeseen disability that could help you avoid severe loss of income while you are recovering from covered disabilities.
Although not insurance in the purest sense—properly establishing and maintaining an emergency fund will provide you and your family with the protection that you need to help you avoid life's inevitable risks that will come your way.
Although it takes focus, effort, determination—and planning to properly establish an emergency fund—it is something that you "must" do if you desire success at a high level when choosing your insurance products.
Be sure to properly reduce or eliminate your debt prior to—or while you are establishing your emergency fund.
By doing so you can put yourself and your family in real position—for real success!
You can often get insurance at a lower rate and with broader coverage if you participate in group health plans—whether on the job or provided in other group settings.
You can often get group life insurance at a lower rate if you participate in group life plans whether on the job or provided in other group settings.
Health insurance is an area that you must address as rising health costs and your inability to pay for medical procedures and preventive health care measures—out of pocket—are rising far faster than the cost of inflation.
Insuring your home is a requirement if you currently have a
mortgage on your home—and is optional if you own your home free and clear!
It is imperative that you know what is
covered, you know your coverage limits—and you know the riders that you not
only have in place—but the riders that you actually need.
Riders or special endorsements protect you and provide additional coverage for things that are not covered in the standard policy.
Common riders include:
Also be aware of
percentage deductibles and what they cover and what is excluded. If you are in a
state that offers them and they are a part of your policy be sure you understand in clear terms what is covered.
The standard policy covers damage caused by major threats—to a
limit—such as fire, hail, wind, lightning, falling trees, tornadoes, cars and
Earthquakes, hurricanes and flooding by rivers or levees are not covered under the standard policy—therefore you would have to purchase additional coverage.
electronics, clothing, tools and other personal belongings would be covered.
The standard policy also provides you coverage for liability if someone was injured on your property or if you or other family members—including your dog—caused damage to others.
Liability coverage is normally $100,000, however you can increase that amount if you choose too—and in today’s "lawsuit" society—you want to have at least $300,000.
Be sure to consider raising your deductibles to help reduce your premiums and be sure you have a properly funded emergency fund in place—or you are working toward that goal.
Also be sure that you are aware of personal umbrella policies and how they can benefit you and your family.
Standard Home Owner policies often called HO 2 or HO 3 policies
normally cover damage to your home or other structures on your lot—such as
garages, storage sheds, fencing—etcetera.
Be sure to insure your home at “replacement value” as that amount is in almost all cases higher than your appraised value, market value—or tax assessed value.
It is also wise to select the “extended coverage rider” that can protect you from rising building costs after a natural disaster. By doing so you can get up to an additional 30% of coverage on top of the replacement cost that it could take to rebuild your home.
In addition, it is wise to purchase an “ordinance” or “law endorsement rider” which pays the higher cost of making repairs that conform to current building codes.
If you are purchasing a home in the future—be sure that you are aware of the history of the home—as far as insurance claims—and you have properly addressed environmental concerns that you may have with the home and surrounding community that you are considering moving into!
If you have a home business you must realize that the
contents of your business may not be insured under your standard home or renter’s
policy—or may be covered only to a stated limit.
Depending on your business—you may need to increase your liability levels, insure your equipment and inventory and seriously analyze the need for added coverage in other areas.
Keep in mind that in most states an endorsement does not cover liability related to your business—therefore you would need “a small business insurance package” which would protect your business property at home or on the road and cover liability for theft—and loss of income to a limit.
In many states it is fairly inexpensive (several hundred dollars a year)—so you should purchase a policy if you want additional protection—in a cost effective manner.
Be sure to get a quote from your current insurer first—and if you feel they are too high—search the insurance marketplace to find a better rate.
Be sure to select a highly rated company and be sure to do your due diligence on the front end—not after the policy is selected!
Life insurance is critical for your and your family’s future
and you should obtain the right amount at a highly rated company.
Did you know that there are a number of ways that you can determine your and your family’s insurance needs?
Obtaining life insurance is a critical component of transferring wealth and you should be in the game at some level regardless of your income. If you have dependents and you want to position them for success after your unfortunate transition life insurance is a cost effective way of doing so.
Long-term care is an area of insurance that is fairly new in
popularity (last 20 years or so) but should be of real concern to you as you
approach age 50 and beyond.
Do you qualify for Medicare?
Are you on track to reach your financial and retirement goals and do you know if you will have a need for (Long-Term Care) LTC insurance?
Are you in position to self-insure or have you purchased LTC insurance—or do you have a plan in place to purchase LTC insurance based on current premiums—and the way that LTC insurance now operates?
These are questions that you must ask yourself and answer appropriately if you want to address your long-term care needs appropriately.
Rental insurance will protect your contents that you may
have inside a property that you are currently renting. Owners of rental properties will normally
have insurance on the structure—however the insuring of the contents that are
inside—is your responsibility!
Be sure to obtain the coverage that you need at a highly rated company.
Standard rental insurance is often called HO 4 and it would
protect the loss of your personal property from fire, theft and other specified
losses—and they too include liability coverage—so you can increase those limits
If you have auto insurance as well you can purchase an umbrella insurance policy and provide additional liability protection—for you and your family.
If you don’t have an auto—you can still increase the liability levels on your rental policy.
Also keep in mind that the standard renter’s policy does not cover losses from floods, earthquakes, sewer backups, hurricanes (where available) and other perils—therefore you must purchase an additional policy or add endorsements or riders to your existing renter’s policy.
Personal Liability (Umbrella Insurance Coverage)
Another area of insurance that you need is personal liability—and be sure to get it at the appropriate level.
If you have a high net worth—be sure to seriously consider your need for and potential benefit of this protection.
If you have auto, home or rental insurance and you have a high net worth or you are a high income earner—the purchase of additional levels of personal liability coverage should be given real consideration.
For just a few hundred dollars annually you can gain coverage of one million dollars or more with many highly rated insurance companies.
Personal Liability or an Umbrella Insurance Policy would
protect you and your family—in a similar manner that an umbrella would protect
you from the elements.
You would not get as wet—(lose as much financially if you were faced with a liability issue of a high amount)—if you increased your liability levels on your and your family’s policy.
By purchasing an umbrella policy (particularly if you are a high earner—or have a high net worth) you can further protect your home, investment assets, vehicles and other valuables that you may possess.
Personal Umbrella Liability increases your liability
protection to a higher level than that which is stated in your standard policy on
your auto, home or renter’s policy!
It is a cost effective way to increase your liability coverage and should be given strong consideration.
Other Helpful Tips:
Other helpful considerations when it comes to purchasing insurance is to choose a highly stable company and compare rates appropriately as there can be wide swings in insurance premiums from company to company and depending on where you live and the type of insurance that you are pursuing.
It is not uncommon for reputable credit unions and other financial institutions to partner with insurance companies offering term insurance for a 50 year old male at $20 per month with increases in premiums in 5 year intervals with premiums topping out at age 70 for over $50 for $15,000 of term insurance.
By shopping appropriately that same individual could obtain $250,000 of coverage and possibly more depending on their health and other factors for $60 per month for a 20 year period with no premium increases during that period.
For a relatively low overall additional premium payment—coverage was increased by $235,00 by just taking the extra effort and time to properly shop for insurance and not being pressured or compelled to purchase insurance based on your relationship with your credit union, bank or other institution.
Similar scenarios as the above (although maybe not as drastic) may also be present when you are pursuing other areas of insurance as well. Be sure to analyze your insurance needs in a careful and critical manner to ensure you reach the future goals that you desire in a way that serves your best interests.
All the best to your insurance selection success...
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About This Article:
The above article was written by Thomas (TJ) Underwood. Thomas (TJ) Underwood is a former fee-only financial planner, a former top producing loan processor and is currently a licensed real estate broker in the state of Georgia.
He is the writer behind The Real Estate & Finance 360 Degrees Series of Books that include The Wealth Increaser, Home Buyer 411 The Smart Guide to Buying Your Home, Home Seller 411 The Smart Guide to Selling Your Home, and Managing & Improving Your Credit & Finances for this MILLENNIUM.
In addition he is also the writer who created The 3 Step Structured Approach to Managing Your Finances, and CREDIT & FINANCE IMPROVEMENT MADE EASY—NEW GUIDE that you can download right now "(at MIMIMAL cost $3.95)" to learn more about his writing style and how you can achieve "more" success in the current economy.
He is the creator of TheWealthIncreaser.com where he regularly blogs about helping consumers improve their credit, finance and real estate pursuits in an intelligent, consistent and proactive manner.
He’s always looking for ways to make intelligent finance improvement happen for those who “sincerely desire” success in their future. He was the first financial planner to coin the phrase "financially alert mind" and he consistently writes in a style that is designed to provide consumers the ability to take control of their lives and achieve great results.
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