Insurance Checklist Plan to Implement
- The first item on your checklist should most likely be life insurance. Most financial advisers will tell you that this forms the foundation of any sound financial plan. Although there are several variables to consider when choosing life insurance, the amount of coverage should probably at least equal the amount of debt and obligations you have, plus a little extra to cover medical and funeral bills. If you have children, then you may want to consider an amount of coverage that could fund their higher education expenses as well, or else create an investment portfolio that can pay for education, retirement or other expenses for those you leave behind.
There are two main types of life insurance: term and permanent. Term insurance is much cheaper and allows young families to carry much higher amounts of coverage, while permanent insurance costs much more. However, permanent insurance allows for part of each premium paid to accumulate inside the policy tax-free, and at some point the policy becomes fully paid for with no more premiums necessary. But the coverage will continue until the death of the insured, at which time it will pay out. All death benefit proceeds from any type of personal life insurance policy are tax-free. Therefore, those who need large amounts of coverage may find term policies more affordable, while those who are afraid that they may become uninsurable later in life should probably look at a permanent policy.
- Adequate health coverage is critical for most families and older persons today, and even those who are young and in good shape physically ignore it at their peril. The Obama Administration has mandated that everyone must obtain health insurance by 2014 or face a financial penalty. Therefore, maintaining proper health coverage should be the second step in your checklist. But the costs of co-pays and low deductibles can really drive up the price of your policy. Catastrophic health insurance is generally the most efficient kind, and you may be better off in the long run if you set aside a savings account to pay for checkups and prescription drugs.
- Most people don't realize that becoming disabled can be far more devastating financially than death. Those who become disabled will continue to need care, perhaps for years to come or even the rest of their lives, and they may need therapy or treatment by professionals during this period. Statistically speaking, disability is exponentially more likely than death. Therefore, a long-term disability policy is almost always a smart choice, especially for higher-income earners, and should perhaps be placed before the other types of coverage on your checklist.
- State laws require that homeowners and drivers maintain adequate insurance on their houses and cars. However, the level of coverage you choose should be commensurate with the value of the item being insured. It is not wise to purchase collision and comprehensive coverage for an old car, nor is it necessarily smart to carry replacement value coverage for newer items. Although this level of coverage provides a sense of comfort, the difference in cost can add up over time. But the necessity of this type of coverage makes it a must for everyone's insurance checklist.
Policy Tips and Maintenance
- The last steps on your insurance checklist are to select the proper beneficiaries for each policy and to keep your coverage current and relevant to your situation. Promotions, layoffs, marriage, divorce, childbirth and other life events will often alter your insurance needs, and your policies need to keep up with your life. It is also important to note that most types of insurance policies carry a number of additional riders that can be purchased, such as return of premium or additional coverage under certain circumstances. However, most financial experts maintain that these riders are usually not worth the cost, with the money that would go to pay for them being better spent elsewhere.