Insurance

Insurance is an important part of managing your money. It is protection for you and your family from financial loss if the unexpected happens. If you do not plan ahead and protect yourself with insurance, you may have to use funds set aside for other financial goals or emergencies, or go further into debt by borrowing money.

Determining how much and what type of insurance you need will depend on your circumstances. If you cannot afford or do not want to afford the consequences of the risk, then you should consider getting insurance.  When you decide what risks to cover, note that the severity of the consequences is more important to consider than the chances of an event occurring.

Managing Risks to Your Financial Security

Remember, when you decide what risks to cover, the severity of the consequences is more important to consider than the changes of an event occurring.

Auto Insurance Example:

Repairing an automobile can be quite costly and if damage occurs, you want to be able to repair or replace it, but there is more to auto insurance than just covering the car itself.

• You can obtain liability coverage to protect you in the event you are held legally responsible for the bodily injury or death of another person, or for damaging someone else’s car or property.
• You may also obtain medical payment coverage that pays for medical treatment for you and your passengers during an accident, regardless of who was at fault.

Without sufficient coverage, you could lose the money and property you own and perhaps even have to pay part of your future income to cover damages for which you are held liable.

Insurance Coverage Tips

Before you purchase insurance, check with organizations such as your state’s department of insurance, the Better Business Bureau, and the FTC for free tips and online tools and information. Visit the following websites for more information on insurance:

• naic.org
• insureuonline.org
• bbb.org
• ftc.gov
• mymoney.gov

In addition:

• Shop around for products and services; not every company charges the same rate or offers the same features.
• Ask specifically about discounts for good driving records, good health, good grades, and special education or training.
• Consider the cost and benefits of opting for higher deductibles.
• Read your insurance policy carefully (remember it is a legal document) and ask questions if you do not understand any terms.
• Maintain and review files for insurance policies (for example, life, health, property, casualty, automobile, liability, and disability) at least once a year; needs change with life stages.

Insurance Issues for Military Service Members

Members of the armed services can be deployed on short notice, leaving little time to address their personal or business affairs.

Insurance coverage, in particular, is often affected when someone moves out of state or spends an extended period of time away from home.

• Before purchasing an insurance policy, ask the agent or broker specific questions about how the company will handle issues related to the deployment of policyholders in the military.
• Each company’s guidelines can vary. By shopping around, you may be able to find an insurer who takes the specialized needs of service members into account.

As a service member, you have certain rights and protections under federal law with respect to health and life insurance.

Additional information regarding insurance issues for military service members and their families can be found at:

• naic.org/consumer/military.htm
• bbb.org/military
• insurance.va.gov

Planning for Unexpected Life Events

Long-term care is care or help with daily activities for those with a chronic illness or disability.

The need for long-term care can come at any age due to disabling diseases, car accidents, Acquired Immune Deficiency Syndrome (AIDS), brain injuries, strokes, and other disabling events.

Millions of people serve as financial caregivers for ill or elderly spouses, parents, children, or other loved ones. They perform services that include paying bills, handling deposits and investments, filing insurance claims, and preparing taxes. This role can be costly and physically and emotionally exhausting, especially for a caregiver who lives far away.

Families and individuals who plan ahead for long-term care will be in a better position to understand long-term care changes, weigh options, and make sound long-term care decisions.

Steps to consider:

• Prepare a plan for increasing your emergency fund. Start by reviewing your income and expenses.
• Make sure trusted family members know where to find personal and financial documents in an emergency.
• Make sure you are properly insured.
• Maintain a healthy lifestyle.
• Consider a durable power of attorney.
• Set up direct deposit of pay and benefit checks into bank accounts.
• Set up automatic payment of important, recurring bills.
• Create a living will or other instructions about future medical care.