Insurance provides disaster protection and peace of mind. The last thing anyone needs is a financial crisis in addition to a car accident, home fire, or the severe illness or death of a family member. Insurance needs change over time and as your life changes -- from the teen and college years to your senior years and the stages in between. Each stage brings different insurances needs. Here are three common life stages where insurance needs can differ significantly.
A rite of passage for most American teenagers is getting a drivers license. Not long afterward, it’s off to college or out on their own. Many may get their first car during this time and that’s likely the first time they’ve given any thought to insurance.
Teenage and young adult drivers can add from 50 and 100 percent to the family’s auto coverage cost. It’s usually cheaper to have a teenage driver on the family’s policy rather than buy a separate policy. To help reduce the insurance cost, choose a safe car with a high safety rating. Other discounts may be available for good students. If a college student doesn’t have a car during the school year and attends a school at least 100 miles from home, tell the insurance company. Rates may be lowered for the period the student is not at home.
Personal Property
Most college students or young people just starting out on their own aren’t homeowners. But they have belongings that need protection. A student living at home or in a college dorm usually has their personal possessions, including a computer, TV, clothing, etc. covered by the family’s homeowner policy. A student living off campus probably will not be covered by the family’s policy and should purchase renter insurance.
Health
In most cases, a full-time student is covered by the family’s health plan until he or she graduates from college, or remains a full-time student up to 23 years of age. However, this may not apply to HMO coverage. If your HMO doesn’t provide non-emergency coverage in the school’s area, a separate policy for the student should be considered. Most colleges have a clinic on campus and may offer supplemental insurance as well.
Young marrieds have to make several adjustments when planning for two. They depend on each other for support and may need financial protection they haven’t considered before. In merging two households and perhaps two careers, couples need to consider which employer provides the best existing insurance for health, life and disability coverage, and whether employer-provided coverage is complementary or would be duplicative.
Auto
Young singles tend to pay higher rates for insurance, but when two people get married, they probably qualify for a discount. Couples with different auto insurance companies should review their existing coverage to see which company offers the best combination of price and service. Once they start a family, young parents tend to become more careful behind the wheel and generally enjoy lower insurance rates, too.
Home
When you buy homeowners insurance, don’t be surprised when the insured value of the house is less than the market value. There’s no need to insure the land the house is on. The insured value needs to be sufficient to repair or replace the home if there is a major disaster. Be sure the coverage keeps pace with additions or major improvements that increase the value of the home. Coverage will cost less if you set the deductible as high as you can afford.
A standard homeowner policy includes a limit on personal possessions, so an endorsement or floater may be needed to cover high value items. Merging two households presents a good opportunity to do a home inventory. This helps couples understand what their insurance coverage needs are – and provides have a record of what to claim if a real disaster strikes.
When arranging homeowners insurance, one important decision involves replacement cost versus actual cash value coverage. Replacement cost pays the dollar amount needed to replace a damaged item with one of similar kind and quality. Actual cash value covers the amount needed to replace the item, minus depreciation.
When you start having children, you’ll likely acquire more belongings such as additional TV’s, home computers, or other electronic equipment. Make sure your homeowner’s insurance keeps pace with your growing family and possibly a larger home. Consider inflation protection so that the homeowners insurance automatically rises with property values in your region. Safety features, such as alarm systems, smoke detectors, strong doors and deadbolts, not only keep the family safe, they save money because they reduce the likelihood of insurance claims. If you plan to add a family dog, check with your insurer before bringing home an aggressive breed. If you have a backyard pool, trampoline or swing set, consider increasing your liability coverage through an
umbrella policy in case someone is injured on your property.
Life
Couples need to take an even closer look at life insurance once children arrive. It can provide the surviving spouse, children or other beneficiary with crucial resources. There are two basic types of life insurance:
Term insurance provides a simple death benefit for a fixed period of time. There are several different types of term insurance – renewable, convertible, level, decreasing and increasing term coverage. The premium may stay the same for many years. However, when the stated term expires, the premium can go up.
Cash value insurance, as the name implies, provides permanent protection as long as you pay the premium. The premium does not increase over time. The younger a person is when buying the policy, the lower the premium will be for the life of the policy. But because premiums remain level, cash value coverage tends to be more expensive than term insurance. There are different types of cash value or permanent insurance as well – whole life, universal life, variable life and variable universal life insurance.
Health
Most people who work full-time get health insurance through their employer. Along with bringing two lives together, if both spouses work, the marriage also brings two health insurance plans. These health plans frequently include dependents.
Medical costs are rising dramatically and employers are increasing the amount they expect workers to contribute to health care costs. In certain cases, policies may exclude family members who have another health care plan. If you have a choice, families with two working spouses should compare coverage, co-pays and costs and choose the best mix that offers the best coverage for the least amount of money.
Long-Term Care
Middle age is the best time to consider whether to buy long-term care insurance. You are most likely to be eligible and premiums will be the lowest. A healthy 65 year-old person can expect to pay between $2,000 and $3,000 a year for a policy that covers nursing home and home care costs.
By the time you retire, your accumulated wealth is usually may be at its height. The challenge now is to manage your assets so that they last as long as you do.
Auto
Some insurance companies give discounts to drivers between the ages of 50-70. As drivers age, however, their abilities change. Many states mandate discounts for seniors who have successfully completed driver refresher training. Older drivers, those 70 and older, have higher rates of fatal crashes, based on miles driven, than any other group except very young drivers. These older drivers should expect to see their rates begin to rise.
As they age, older drivers become increasingly vulnerable to serious injury. In most cases, seniors themselves, sensing that their physical skills are not what they once were, begin to restrict their driving – limiting themselves to daylight hours and familiar roads, for example. And while many states require more frequent vision and, if necessary, driving tests later in life, individuals and families also need to decide when it is no longer safe to get behind the wheel.
Home
Once you pay off your mortgage, it’s still important to have protection in case of fire, burglary, and natural disasters. Many insurance companies provide discounts for retirees, because they spend more time at home; have more time to maintain their property; and are more likely to act promptly to correct small problems before they become big problems.
Some retirees stay active by working part-time. If you work at home, you may need a supplemental liability policy that covers your work-related activity. Consider an umbrella policy to protect your accumulated assets. Real estate, securities, and savings could be wiped out by one lawsuit. Umbrella coverage adds a layer of protection beyond your standard homeowner and auto policies.
Life
Life insurance is cheaper the earlier in life it is purchased. Retirees can still get life insurance, but should be prepared to pay much more for it. For those who already have coverage, premiums will generally move higher as existing term insurance reaches the end of a set policy period and is up for renewal. Cash value coverage tends to have a set premium that was locked in years earlier. In order to preserve the benefit for a surviving spouse, it is necessary to continue to pay the premium.
Health
Most people under 65 get group health insurance through their or their spouse’s job. Most people who are 65 and older get Medicare from the federal government. Medicare has two parts:
Hospital Insurance (Medicare Part A) helps pay hospital bills; and
Medical Insurance (Medicare Part B) helps pay for doctor bills.
Anyone enrolled in Social Security is automatically signed up for Medicare when turning 65. Initially, most people get Medicare Part A coverage when signing up. There is no fee involved. Medicare Part B is optional and has a fee. Generally, individuals who are still working and covered by an employer-provided group health plan do not need Medicare. It’s best to keep group coverage for as long as possible. Some employers may continue health care coverage for long-time employees when they retire.
Long-term care insurance is not part of Medicare and is purchased from private insurers. It is designed to pay for the many services needed by people who suffer from chronic long-lasting illnesses and need regular care, either in their own home or in a nursing home. For those who have a long-term care policy, at least two activities of daily living (bathing, eating, dressing, continence and mobility, and cognition) must be lost in order for the coverage to take effect.
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Married and Starting a Family
Senior Years
