Insurance. We often view insurance the same way we view estate planning – “I’ll get around to that when I have time.” Yet life has a way of keeping us so busy that our spare time rarely gets allocated to such mundane topics. However, we must look at insurance for what it really is – a hedge against the unpredictable events that could damage our family’s financial security.
In assessing this issue, I looked to my local insurance agent, Lauri Woolard of State Farm Insurance. Lauri has been in the “trenches” of the insurance world for nearly two decades, and has experienced first-hand the insurance issues that challenge most people. For this article, I asked Lauri what she thought were the top 5 insurance “mistakes” that people make. These top 5 mistakes are:
1. Not Keeping Insurance Current. Over the course of a year or two, things change and your insurance coverage can become inadequate or outdated. On an annual or bi-annual basis, you should meet with your insurance professional for a “checkup” to make certain you and your family are properly protected.
2. Failing to Buy a Personal Liability Umbrella Policy. This type of policy – also called a PLUP – typically adds additional liability coverage to other insurance policies, such as automobile or homeowner’s policies. The liability limits in these policies are often in the $300,000 range, which may be woefully inadequate if you find yourself responsible for causing serious injuries to others. By extending your liability limits with a PLUP, you can protect your personal assets from liabilities and lawsuits that are more than the limits of your primary coverage. For the peace of mind a PLUP provides, it’s a great value.
3. Not Buying Adequate Private Life Insurance. If you have dependents or debts, you should consider buying adequate life insurance in the event of your untimely demise. The “right” amount of life insurance varies from individual to individual. This is a question that an insurance professional can help you answer. A common misconception is that life insurance provided through a group plan at one’s place of employment is both adequate and portable. Typically neither is true. Many group term life plans only provide a nominal amount of coverage (e.g. $10,000). In addition, many such group life insurance policies are not portable if you leave your job.
4. Failing to Purchase Disability Income Insurance. In the U.S.A., 30 percent of workers will be disabled for more than three months, 20 percent of workers will be unable to work for at least a year due to an injury, and 14 percent of Americans will be disabled for more than five consecutive years. If you are medically disabled and can no longer work, disability income insurance provides you with income to pay your bills and support you and your family. Yet, a surprisingly small number of Americans (approximately 30 percent) actually purchase this form of insurance.
5. Failing to Consider Long-Term Care Insurance. Almost half of individuals in the U.S.A. will require some form of long-term care during their lifetimes. With the general aging of the population as well as medical advances that sustain lives, this percentage is rapidly increasing. However, most individuals do not have sufficient assets to fund both their retirement and fund their potential long-term care costs. Purchasing long-term care insurance may be an essential ingredient to your financial security.
