Insurance: Are You Covered?
Posted by Guest Blogger Holly Gillian Kindel:
Every day we face risks: some we recognize, others we may not. Getting into the car, eating prepackaged food, and watching television are all behaviors with a certain level of risk. Risk management is simply the process of assessing your risks and choosing how to handle them. You can manage risk by avoiding it, retaining it (either consciously or through inaction), or transferring it to another (through the purchase of insurance). We all employ a combination of these methods; the ideal is to have our method of handling risk match our risk capacity (typically measured financially) and risk tolerance (more of a gut check). Funnily, our capacity to handle risk doesn’t always match up with our tolerance. One of the greatest gifts you can give to your loved ones is to carefully design your risk management plan, considering not only how you feel about risk but also how they will be impacted by your decisions.
The first rule of insurance is “don’t risk a lot for a little.” Naturally, we don’t want to dwell on worst case scenarios but, in insurance planning, a vivid imagination can be your ally. Set aside some time to examine your exposures and plan accordingly. Below is a list of the kinds of insurance that you will want to consider.
Health Insurance
The best insurance policy is to support your health with a nourishing lifestyle. Making wholesome choices about food, exercise, and stress levels is crucial. Preventative healthcare such as acupuncture, chiropractic treatment, and body work can also prevent future expenses. Health insurance is part of a lifelong health plan. If cost is a concern, purchase a high deductible or enroll with an HMO. If you do select a PPO, keep in mind that the co-payments can really add up. Avoid trips to the emergency room.
Disability Insurance
Most people’s greatest asset is their earning capacity, so any sort of disability can have a major impact on their finances. Buying a disability policy, if feasible, and building up an emergency fund to cover expenses during the elimination period (the time before payments kick in) is imperative.
Life Insurance
First, determine who is dependent upon you for support and whether or not they have other options to support them. If not, then consider what dollar amount will enable them to continue their current lifestyle. If you do not have dependents, you most likely do not need insurance. Buying insurance on children is not recommended for this reason.
Property & Casualty Insurance (Home, Auto, Liability)
When purchasing home insurance, make sure that your policy is designed to cover rebuilding the home. Also remember that for auto insurance the state limits are far too low to provide you with adequate coverage, especially when considering liability settlements. If you have a home and auto, you may want a separate liability policy (often called an umbrella policy). It may be more economical to purchase a large umbrella policy than to raise the liability limits on your home and auto. You’ll want to have enough coverage to protect your assets.
Perhaps most important, make sure that you take time to assess the frequency and magnitude of risk in your life. It is the risks that are low in frequency and high in severity that may require insurance. Once you’ve gone through this process, you can move out of the world of fear and into the world of trust, confident that you have examined your risks and taken action accordingly.
