insurance: don't be penny wise and pound foolish

Most people don’t like to think about or spend money on insurance. However, insurance is the foundation of a strong financial plan, and protects you and your family from financial loss due to illness, accident or unexpected disaster. The type and amount of insurance coverage you need depends on the stage of your life. Consider the types of insurance below when evaluating your insurance needs.

Types of Insurance for Seniors:

1. Health Insurance is a type of insurance that everyone needs. You are eligible for Medicare when you turn 65 years old. After having researched different coverage, options and costs, apply three months before you turn 65 or your coverage may be delayed. 
   
2. Homeowners Insurance insures against the loss of property, covering the cost of rebuilding and/or repairing your home from damage caused by fire, storm, burglary or natural disaster. It also covers the contents of your home, but does not cover damage from normal wear and tear. Most mortgage lenders require homeowners insurance. Renters insurance provides coverage for your personal possessions.
   
3. Automobile Insurance is required by law if you own a car, with each state dictating the extent and type required. Auto insurance covers harm done to you, your car, other people, or other people’s property. 
   
4. Umbrella Insurance increases your liability coverage beyond your homeowners and automobile coverage in case you’re sued for accidental injury or property damage.
   
5. Life Insurance is designed to insure against the death of the primary wage-earner. The two main types of life insurance are term and permanent. Term insurance is cheaper and protects you if you die during the term. Permanent insurance offers an investment component. 
   
6. Long-Term Care Insurance protects against the risk of extended medical care. Medicare’s long-term care coverage is limited and Medicaid only pays for long-term care after you’ve depleted all other financial resources. 
   

Things to Consider When Purchasing Insurance

1. Research and compare policies for the best price.
   
2. Choose an insurance company that is financially sound. 
   
3. The higher the deductible (the amount of money the insured pays before the insurance company starts paying), the lower the premium (the amount of money the insured pays to buy the insurance policy). Choose a higher deductible if you have enough savings to pay the deductible.
   
4. Homeowners/Renters Insurance
   
   1. Don’t file multiple claims to your homeowners insurance; the company can decide you’re high-risk and increase your premium.
      
   2. Purchase homeowners/renters and auto insurance from the same company to receive a discount.
      
   3. Take an inventory and estimate the replacement cost of your possessions.
      
   4. Consider adding additional insurance to cover valuables such as jewelry.
      
5. Automobile Insurance
   
   1. Collision coverage pays for damage to your car. A general rule is that the value of your car should be ten times the annual premium; if not (i.e. your car is older), consider dropping your collision coverage.
      
   2. Your standard automobile liability insurance insures you when you rent a car; no additional insurance is needed.
      
   3. To save on premiums, enroll in a data tracking program that tracks your driving.
      
6. Life Insurance
   
   1. You need life insurance if you have dependent children or a large mortgage. 
      
   2. You most likely don’t need life insurance if you no longer have dependents or your estate is large enough. You still might want life insurance to pay for final expenses, replace pension benefits, or pay off debt.
      
   3. Don’t think of life insurance as an investment, but a protection against a potential devastating financial loss. Good advice: buy term insurance and invest the savings.
      
7. Long Term Care Insurance
   
   1. Consider buying long-term care insurance to protect your assets if you can pay the premiums.
      
   2. Don’t buy long term-care insurance if your only source of income is Social Security and you have a low net worth; you may not be able to afford the premium and you may qualify for Medicaid.
      
   3. Long term care insurance is cheaper if you purchase it when you’re younger.
      
   4. There is no guarantee that premiums will remain stable or affordable.
      

Take the time to research the appropriate type and coverage level of insurance to give yourself peace of mind and protect your assets and family if the unexpected happens.

Beth Carroll is a CPA and a Professional Daily Money Manager. Her company, Cornerstone Money Management, LLC, helps seniors in their homes with billpay, financial organization and cash flow management. You may reach her at [email protected] or 401-323-4895.