The right insurance coverage can protect your hard earned money. It’s not just an expense that you incur – it’s truly there as a financial benefit.

We’ve all been there. Driving home from a day at work, or grabbing a few groceries and wondering why the traffic hold up, right before we see the minor accident on the side of the road. Crappy commute timing, but at least it wasn’t you. Sucks for them.

Until you are them.

And you find out your insurance coverage is less than stellar.

Sucks for you.

It doesn’t have to be that way!

Let’s dive into all things insurance so that you know what lies ahead, should you need to use it. Or rather WHEN you need to use it.

Here are four important topics we will be covering…

Types of insurance, and when you need them.
Recommendations for finding insurance coverage.
Reasons to check your coverage, and how often.
Ways that insurance protects your finances.

Types of Insurance

Life

Long story, short – life insurance helps replace your income if you die prematurely and others are dependent on your income to live a full life. You should consider life insurance if married, and certainly when you have children. It’s not just to cover the cost of your funeral expenses, which average between $7-$10k but the supplement of your income (or the jobs that you provide in the home) is most important. There are several varieties of life insurance. I will not bore you with ALL of the details now but…

There are two major types of life insurance.

Whole life or permanent coverage covers your…you guessed it, whole life and has a death benefit paid out to the beneficiary whenever you die. Whether it’s 29 or 92. You simply pay a premium each month. This coverage is more expensive than term, but it does last an indefinite amount of time – and has some cash value (payout) associated with it.

Term life coverage has a term or end date associated with it. A 20 year term, for example will cover your family if you die within that 20 year term. You will pay insurance costs monthly for those 20 years, and if you don’t kick the bucket within that timeframe your benefit will expire – although you will not. If you died 21 years after you took out that policy, your beneficiary would not receive a death benefit.

Child riders are something that can be added on to policies, typically at very low cost, to add $10-$20k if a child were to pass.

You can typically get much more coverage, at a less expensive price point with term insurance coverage.

How about a Real Life Example?

My husband and I have 20 year term life policies. We updated our policies in 2013 after we had baby #2. Based on our health status we were given rates for our policies – I ranked a bit better so got a top tier status, on a million dollar policy for $30 per month. My hubby got a $500k policy for $75. We pay $105 per month for coverage.

Let’s say that I have an untimely death, within the 20 year policy.

My family will be able to take that $1m and invest it, living off of the interest it accrues at roughly $100k/year. That should certainly make sure that they are comfortable without my income coming in monthly. They’ll probably make the move to Mexico at that point…without me.

Okay, I don’t expect to die in the next 11 years – so my policy will lapse. I’ll be 52 years old. Our girls will be…let’s do the math; 23 and 20. They will be on their own, and not need me to cover their gymnastic fees, shoe purchases, or go in halfsies with their car purchase. James is self-sufficient without my income, and this house should have been paid off long before – so, his expenses are pretty minimal. Essentially, we’ll be able to ‘self fund’ our expenses at this point if one of us were to die at that point.

We will pay a little over $25k for our 20 year policies in total, but have the assurance to the tune of $500k-$1m that each other would be covered if we left this earth early.

Auto

This one we’re all quite familiar with, right? Auto insurance covers our losses, or the losses to another’s vehicle and/or health expenses if an accident occurs. There are varieties of coverage options. You should become familiar with some of these terms in the following link.

Insurance Terminology

The more ‘at risk’ you are as a driver i.e. prior accidents, tickets, age, driving distance, etc. the higher your monthly or annual payment premium may be. You also have to be mindful of how much coverage you have, this can be quite variable between how much you have to pay as a deductible before your insurance “kicks in” or limits to liability that will be paid out.

Do I recommend dropping down to liability only coverage once your car is paid for?

No, I typically don’t…unless you’re driving a 1981 Subaru wagon perhaps. This was a painful lesson learned where I thought I’d save $50 per month by dropping down coverage after our Ford Escape was paid off – and subsequently got into an accident that caused $5k in vehicle repairs – that we had to cough up. $50/month versus $5k cash. I won’t go without full coverage again, because the low cost covers my risk of having to pay more than I want to for replacement or repair.

Home

Renters protect your stuff! Renters insurance is very low cost, typically around $25/month and covers your personal property for all kinds of reasons.

Home owners, you need to insure not only your personal property but also the building itself, and your liabilities if someone were to be injured on your property. This is important, and I’m sure you have it if you have a mortgage – but what do you know about your policy? Do you have any riders? Should you? Perhaps you have some personal property that needs extra coverage, like say…a wedding ring? You can add special provisions for particular valuables to go above and beyond what typical insurance may cover.

Health Insurance

The cost of healthcare is outrageous. Protecting yourself to share some of that liability in your premium (the amount you pay monthly) and your deductible (the amount you have to pay before any extra coverage kicks in, and then of course your co-pay (small percentage/flat rate per visit) is minor compared to a catastrophic event that lands you in an emergency room or under anesthesia.

Remember that time I was complaining about our newly purchased health coverage? I’m grateful for the coverage – but still getting used to the price point. Do you have coverage through your employer? This is a significant perk that you should ‘count’ those dollars towards your benefits.

Disability

Disability insurance helps cover your lost income in the event of a major illness or injury. Most employers cover some level of disability insurance. Rule of thumb is to obtain coverage around 60-80% of your after-tax income. Note to self. Look into disability insurance.

Long Term Care

Getting old is expensive, and if you need any assisted care in your later years – which is likely…it’ll cost you. Right now, the average cost per month for assisted care is close to $8k. The best time to shop for LTC insurance is between 55-65, the healthier/younger you are the lower the premium, but you may be paying your premiums longer. In the event that you skip out on long term care insurance and die happily in your sleep without the need for assistance, no biggie. But if you do need assistance, you will need to sell all of your assets in order to pay for that support…if you run out of assets, you turn to government assistance and let’s be honest – some of those facilities are not the retirement dream that you were thinking of. It’s not inexpensive insurance ~ $1,200 per year, and premiums will increase as you age, but if you compare this cost to the $8k x 12 = $96k annually, I’d say it’s a bargain for the assurance that your assets can remain yours – and be passed down to your family.

Identity Theft

In this day and age, ID theft is real – and a real pain in the butt to get sorted out. ID theft insurance coverage helps you recoup the costs associated with going through that work to restore your identity, credit etc. It can often be an add to your homeowners policy as well. Easy-peesy.

Umbrella

An umbrella policy covers, well – everything else. Mostly. Once you have a few assets under your belt, you want coverage so that those things don’t get taken away. Umbrella policies are usually in million dollar increments, and very low cost. You can bundle them up with some of your other coverage.

Recommendations for finding insurance coverage.

I recommend using an independent broker to ‘shop’ for coverage for you. If you go with an ABC agent – you are only offered ABC coverage. I’m sure that they’re nice and all – but in this situation you’re paying for an agent’s premium pricing over just the coverage alone.

If you work with a broker – that has access to ‘shop’ with a number of different providers – you get options. You can still absolutely develop a relationship with your broker so that they can help act on your behalf, take care of things for you, and get to know you and your needs – but the price point tends to be better because of that open marketplace option.

In addition, many brokers have access to what I’d call ‘generic’ providers – or smaller companies that still offer the same great coverage, but because they don’t do a lot of big brand marketing….it’s less expensive. When it comes down to it – I want to pay for great coverage, not great advertising.

I’m not brand loyal with my auto insurance. Health insurance payor, maybe. This is a behind the scenes investment that you must have – but it doesn’t have to be top shelf in how well “known” it is. It just needs to provide you with the essential coverage needed.

If you’re local to Portland, OR Metro, I’m a big fan of Atkinson Insurance Group. We use them personally and I recommend them to local clients. Give Mallory a call – she usually sends me a coffee when you do.

3 Reasons to Check your Insurance Coverage

Your coverage needs change.

You downsize, upsize, have a kid, change a job, increase your income – whatever. Life changes will impact your coverage needs.

Policy(s) may be eligible for discounted rates.

Don’t assume that your rate is your rate forever more. You can get different prices at different times. Check in on it, and make sure you’re getting the best rate – and know what needs to happen (i.e. ticket dropping from your record) in order to get that new rate.

Ensure you have the proper coverage amounts.

Going to all of the trouble to get coverage and find out that you’re underinsured – you don’t have enough to cover your needs, or you have to pay a lot out of pocket that nearly drains you anyway. Make sure your emergency fund can cover any out of pocket expenses you may have, or increase your coverage until your emergency fund can support that.

How often should you check your coverage?

Annually. You go to the doctor once a year to check in on your bod – why not follow the same schedule for your insurance too.

I get it all of these preventive measures are a bit inconvenient, take some time and energy – but worth the check up and ask!

Insurance protects your finances.

You lead a big life. Accidents happen. Real life gets in the way – and those incidents are costly. Help mitigate your costs by purchasing low cost insurance so that you don’t have to pay a whole lot for a single incident, let alone a catastrophe with several incidents. Insurance gives you assurance that you keep your home, your income, your savings, your life intact as much as possible when mayhem strikes. Because it’s not a question of if, it’s when.

Ready to put this reading into some action?

Here are your marching orders.

Do an audit to see if you have all of the insurance ‘types’ necessary for your life right now.
Go to Google and look up an insurance broker in your area. Have a few conversations and start shopping around.
Make your annual wellness exam, and also pencil in an annual insurance audit for yourself.
Reach out to me if you have questions about your financial journey.

Schedule a Call

About Sarah

Insurance Coverage 101: Protect your Money