Insurance Check-Up 

 

          With the end of the year rapidly approaching now is a good time to start reviewing your insurance coverage.  Taking the time to your analyze your various insurance policies during a time when you are not in a renewal period will give you the patience to make sure you are getting the best deal.

 

Auto Insurance

          When it comes to auto insurance, laws vary from state to state and can change from year to year.  While minimums may vary, most states require that you carry liability insurance.  It's your protection in case you injure someone or something with your vehicle.

         Experts now recommend single-limit liability coverage with a minimum of $300,000 per accident with no reference to per person injury or property damage limits.  If you have health insurance coverage through your job, 5 to 10 thousand in Medical Payments in  auto policy coverage might be enough.

         If your state requires Uninsured Motorist coverage, consider a minimum of $15,000 per injured person and $30,000, total, per accident.  Always shop around to get the lowest premium. 

 

Health Insurance

         If you're covered under a job related health plan, there are some things you should know about basic coverage.  A better-than-average plan will provide 80% coverage for doctor visits, lab fees and x-rays.  Some plans provide 100% of the cost of a semi-private hospital room for stays of 120 days or more.  Others will pay costs for mental health and substance abuse treatment.

         Pre-paid plans, such as HMOs, will provide all medical care, with an average office visit costing $5.  Government figures show families pay an average of $71 a month for fee-for-service plans with employers picking up the bulk of the tab.  Under an HMO, families will pay around $22 a month. 

         If you are not under a group health plan, you might pay as much as $600 a month to  cover a family of four.

 

 Homeowners Insurance 

         Homeowners insurance comes in three types, HO 1, 2 and 3, with 3 providing the best coverage.  Policies at the HO 1 level may not cover certain loses like burst water pipes.

         If your house were to be destroyed by fire, you would need a replacement value policy in order to rebuild and furnish your home the way it was before the disaster.  Most policies insure contents at 50 to 75% of the amount the house is insured for, so you should think about increasing content coverage by paying  an additional premium.

         Many experts recommend  you be insured for a minimum of $300,000 in home liability coverage.

         Some companies will offer coverage at a discount if you install protective devices such as dead-bolts, fire extinguishers, smoke alarms and security systems. 

         Insurance costs can vary widely depending on in what part of the country you live. 

Life Insurance 

         If you are part of a two-income couple with no dependents, maybe you don't really need life insurance.  But  if  you have a family that  would be financially crippled at your death, you should be covered. The National Insurance Consumer Organization suggests you be covered at an amount equal to five years of your income, plus an added amount for emergencies.

         Life insurance comes in two basic formats , term and cash value.  Term is basically a death benefit policy and can be bought as a policy to be renewed each year at a higher premium, or with a guaranteed level premium.   Cash Value Insurance combines a death benefit with a savings or investment plan.   With a Cash Value policy you have the choice of providing a large death benefit or saving for a goal such as retirement. 

 

 Cutting Insurance Costs

         Considering the fact that of every dollar spent on insurance premiums, only 60 cents is returned in benefits, it makes sense to find ways to minimize your cash out-lay for all insurance coverage.  One way to do that is to carry higher deductibles.  Handle smaller losses out of your own pocket.  This will cut your premiums considerably.  

         The other way to save on insurance is to shop around for lower rates.  Prices for equal or similar policies can vary widely from company to company and location to location, so you'd be wise to compare prices before you buy any insurance product.

         If you're really interested in saving, you might consider investing in

a comparison service.  For $50, Insurance Information Inc. will research term-life rates with a guarantee to save you at least $50.  Call them at 800 - 472-5800.

Insurance You Don't Need

          There are many insurance products that you can live without.  One of them is hospital indemnity insurance.  The coverage, which may only cost you a couple of hundred dollars a year, provides extra cash to cover hospital expenses if you are hospitalized.  The payout, though, is only around $100 dollars a day.  It sounds pretty good at first, but a typical hospital stay can cost you almost $1,200 a day.  Unless you have a couple of hundred dollars to waste, spend your money on good health insurance.

         Another type of insurance you can do without is the "dreaded disease" insurance coverage for illnesses like cancer.  If there is a history of a specific illness in your family, insurers my play on your fears in order to get you to buy this insurance that will cover treatment costs for that illness.

         If you are under age 65 “dreaded disease” coverage will run around $100 dollars a year.  Typically the coverage will pay about $100 a day if you are hospitalized.  But hospital stays  can cost a thousand dollars a day or more and many cancers and similar illnesses are treated on an outpatient basis, so my advice is to save your money.   

 

Life Insurance for Single Adults and Kids

         Life insurance for single adults usually doesn't make sense.  Why?  Because the purpose of life insurance is to help replace someone's income when they die.  But if you're single, chances are your death will not create a financial burden for others.  Unless you wish to leave an inheritance to a loved one, save your money.

         Another type of life insurance that is a waste of money is life insurance for children.  Typically you will pay about $100 a year in premiums for $5,000 worth of coverage.  The loss of a child, even though it is a tragic event, almost never leads to a loss of family income.  Insurance agents suggest that life insurance can be an effective college saving plan.

         Never confuse or combine life insurance with investments.  If you want an investment plan, buy one, but don't  purchase life insurance with the intent of using it as an investment.  Remember, the purpose of life insurance is to protect against a financial catastrophe.

 

Mortgage/Car Loan/Credit Card Debt  Insurance

         Credit life insurance is an  insurance policy issued on the life of a borrower to cover the unpaid balance on a loan in the event of the borrower's death.  Credit life insurance is expensive.  It is almost always totally unnecessary unless you don't have adequate life insurance.  Often, the pitch comes when you are about to borrow money for a car or house.  Credit card companies are also now getting into the act,  offering to provide credit life insurance for  balances on your credit card.

         If you desire to buy life insurance to pay off a loan, purchase less expensive term insurance and save a ton of money.  For example,  credit life insurance on a $100,000 mortgage might cost over $700 a year.  With a term life insurance policy for the same amount, you might pay as little as $100 or so. 

 

Rental Car and Flight Insurance

         Car rental insurance, better known as collision-damage waivers, can cost as much as $15 a day.  This insurance can add as much as 50% to the cost of  renting a car.  Avoid it like the plague.  You are probably covered under your own auto-insurance policy.  Before you rent a car, copy that section in your policy and keep it with you.   This way you can refer to it when you are in the car rental agency.

         One exception to this advice may be when you are traveling overseas.  If you are renting a car outside the U. S., you might be subject  to so many hassles that you might want to select this coverage so that you can have peace of mind.

         Another type of insurance to avoid is flight insurance, often sold in airport vending machines and across the counter.  Some credit card companies also sell these policies.  The odds of your dying in a airplane crash are small, which makes this a good deal for the companies offering the policies and a bad deal for you.