INSURANCE COVERAGE – IS IT ESSENTIAL OR AN UNNECESSARY COST?

M any of us don’t like to talk about insurance. It’s boring, it seems expensive, it feels complicated, and some think it’s a waste of money. Perhaps you’re not sure what kind and how much insurance you need. Unfortunately, there’s not a one size fits all plan for insurance coverage. It needs to be considered on a person by person basis, and it changes over time as life situations and experiences change.   

As the Chief Risk Officer for the company I work for, my job is to help the business understand, assess, and manage different types of risks that the company may face. And that’s based on a level of risk the company is willing to accept. That same view should be what drives your personal insurance coverage as well. Having insurance transfers risk you can’t afford to cover on your own. Without proper insurance, certain situations could bankrupt you. Perhaps when you understand that, it changes how you look at insurance.  

There are eight basic types of insurance to consider:

1. Auto Insurance

• State law requires you to have liability coverage; if you have a loan on your car, the lender also requires comprehensive and collision coverage.

2. Homeowners/Renters Insurance

• If you have a mortgage on your home, the mortgage company requires you to have homeowners insurance. If you’re a renter, renters insurance covers the cost to replace your belongings if they’re stolen or lost in a disaster.  

3. Health Insurance/Medicare Supplement Insurance

• Covers your visits to the doctor, prescription costs, and medical bills when you’re sick or need hospitalization. If you’re 65 years old or older, Medicare becomes applicable. Medicare Supplement Insurance pays for costs not otherwise covered.

4. Long-Term Disability Insurance

• Protects you from loss of income if you’re unable to work for a long duration due to an illness/injury.    

5. Term-Life Insurance

• Keeps your family from losing their home and allows them to make ends meet if you’re not there to provide for them. If you’re single and have no dependents (with a lot of debt and no savings), this insurance will pay off your debt and cover burial expenses.

6. Long-Term Care Insurance

• For a nursing home, assisted living facilities, and in-home care costs for those with a chronic illness/disability. These costs are generally not covered by Medicare and should be considered for anyone 60 years old or older.  

7. Identity Theft Protection

• Provides credit report monitoring and can also include credit restoration services. Identity theft is a real threat even if you’re careful about protecting your personal information. With a few important pieces of information about you, criminals can ruin your finances by taking out loans or spending money in your name. Cleaning up identity fraud can take years to handle on your own.  

8. Umbrella Policy

• An extra layer of protection when you need coverage that exceeds the limits of your homeowners or auto insurance. For a few hundred dollars a year, an umbrella policy can increase your liability coverage and protect your home and your savings in the event you are sued for damages above what your standard insurance covers.

So back to my opening question — is insurance coverage essential or an unnecessary cost? It’s ultimately your decision, but I hope I’ve at least helped to better educate you about the different types of insurance that are out there. But if you’re still looking for more information to help you decide, here are things to consider:

Medical debt contributes to nearly half of all bankruptcies in the United States, so if you’re uninsured, you’re leaving yourself vulnerable to potential financial disaster. One unexpected major medical experience can amount to thousands of dollars of expenses. When my father was in the hospital with cancer, he incurred approximately $100,000 in medical expenses. But with the combination of health insurance and Medicare Supplemental insurance, it paid 100% of those medical costs. That was such a blessing to my mother at that stressful time. Depending on your personal situation, you can save on health insurance with a higher deductible health plan combined with a Health Savings Account (HSA). With a high deductible plan, you’re responsible for more upfront health costs, but you pay a lower monthly premium. There are many different options to consider when looking at health plans, no matter your life status.  

Additionally, statistics show that one-third of Americans will face a disability in their lifetime. So, if you’re in your wage-earning years, a permanent disability could derail your plans of owning a home or paying for your children’s college. Many companies offer long-term disability insurance, so start there. But if you have an emergency fund saved, as I discussed in one of my previous blogs, this is insurance, perhaps, you can skip for now.  

I’ll leave you with this — James 4:14 says, “How do you know what your life will be like tomorrow? Your life is like the morning fog – it’s here a little while, then it’s gone.”  What this says to me is that our life is not guaranteed from one day to the next. And Proverbs 10:4 says, “Lazy hands make for poverty, but diligent hands bring wealth.”  For some of you, a disciplined savings plan can set aside money to be used in the event you incur expenses that would ordinarily be covered by insurance that’s not required, instead of paying insurance premiums. But for others, having insurance coverage will give you the peace of mind and security you want for yourself and your family.  

TIPS:

1. To help you find the right types of insurance to fit your needs, consult an independent agent/broker to help you with this important financial decision.
2. Build insurance coverage into your budget.  

Helpful Resources

Websites:

1. Daveramsey.com/elp (Endorsed Local Providers program formed by Dave Ramsey to help people find a trustworthy agent)
2. Medicare2020.org (to understand the different Medicare Supplement Plans that are available)