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Homeowners insurance can help alleviate the
financial burden you would have if your
home or possessions were destroyed or stolen.
When you buy a homeowners policy, your
insurer agrees to pay the cost of repairing
or rebuilding your home and replacing your possessions
in the event of a covered loss such as fire or theft.
The policy also pays damages in the event
someone is injured on your property or through your negligence.
Types of coverages are listed below.
Dwelling Coverage
- Covers damage to your home.
- It may not cover certain types of water
damage including damage caused by flood.
It also may not cover damage caused by
earthquake, earth movement or termites.
Check your policy to see what other potential
losses are not covered. You can buy certain
endorsements to your policy to provide additional
coverage not generally provided. You can also
purchase separate policies for protection against
losses such as damage caused by flood and earthquake.
- You should buy enough dwelling coverage
to completely rebuild your home.
- Your mortgage lender may require you to cover
the amount of your mortgage; it is up to you to
ensure this covers the cost of rebuilding.
Personal Property Coverage
- Covers damage to your home’s contents.
- Most policies cover the ACV of your belongings
(replacement cost minus depreciation for use or age),
up to a limit that is typically 50 percent of the
coverage of your dwelling. (Higher limits may be available.)
You may not be able to replace damaged or stolen
items without incurring some cost yourself.
- Replacement coverage, which pays to replace
your belongings without depreciation, is generally
available at a higher premium. (To claim replacement
costs, you must actually replace or repair the item.)
- Coverage is limited on certain high-value items,
such as jewelry or silverware. You may need to
purchase a separate policy or endorsement to
fully protect items such as these.
- Coverage may also be limited on personal
property kept in a vacation home, your vehicle
or with a child away at school.
Liability Coverage
- Pays for medical expenses, repairs, and
legal fees applicable if you, your family or
your pets accidentally cause injury or damage
to other individuals or their property.
- There is no deductible.
- Your policy also pays for certain small claims
even if you are not held legally liable for damages.
To reduce your premiums:
- Install smoke detectors, fire extinguishers
and a security system that is connected
to a central monitoring service.
- Raise your deductible — the amount of damages you
agree to pay before your insurer starts paying.
- Quit smoking. You may pay less to insure a smoke-free home.
You should purchase enough life insurance to
pay for your debts and final expenses.
Remember that the premium will continue to
increase as you age. You may want to consider
purchasing life insurance at a younger age to get
a lower rate. Having some form of coverage is a good
idea in the event that you become uninsurable later in life.
Experts suggest you need additional life insurance
in the following scenarios.
- You are married and rely on two incomes to
support your lifestyle. In this case, both spouses
should be insured, especially if there are children.
- You are supporting dependents.
- You are a single parent.
- You want to leave money to family, friends or a worthy cause.
Ideally, you should have enough life insurance to allow
your survivors to invest the principal and use the interest
generated as an additional income source after
debts and final expenses are paid.
Types of life insurance plans are listed below.
Term Insurance
- Provides only a death benefit in most cases.
- Covers an individual for a period, or term, equal
to a specified age or number of years. Your
beneficiaries receive payment only if you die
during the term of the policy.
- Is “no frills” insurance, providing the largest
immediate death benefit for the lowest premium dollar,
particularly for individuals under age 40.
After age 40, premiums rise sharply.
Permanent Insurance
- Combines a death benefit with a cash value —
part of your premium is diverted into a cash value
element that builds over time — and can help you
avoid paying higher premiums in later years.
- Covers an individual up to age 95 or 100. If you
choose to cancel your coverage, any accumulated cash
value will be paid to you.
- May allow you to borrow some of your cash value
while the policy remains in effect, as long
as premiums are paid. However, this reduces the death benefit.
If you are healthy, you may think you can do without
health insurance. However, an accident or illness
could quickly deplete your savings, limit your access
to care and put you in debt for years. It is important
to protect your health and your finances by
purchasing health coverage.
Types of health insurance plans are listed below.
Employer-Sponsored/Group
- The cost of insurance is based on the age,
gender, health status and occupations
of the individuals in the group.
- Many employers pay part or all of the premiums
for employees, even though they are not required
to do so by state or federal law.
- You should take advantage of this employment
benefit if it is available to you.
Individual Insurance Plans
- Available if you are in school, between jobs,
self-employed or work for an employer who
does not provide health insurance.
- Premiums and benefits can vary widely from plan to plan.
- You have the advantage of tailoring coverage that
best fits your needs from the company of your choice.
Choosing a plan: Review a copy of a plan’s Summary Plan
Description (SPD), which describes the plan’s benefits
fully. As you read through the SPD, consider:
- If the plan covers a chronic illness or pre-existing condition.
- The plan’s flexibility. Can you easily change coverage?
- Plan exclusions.
- Limitations of your choice of physicians or
hospitals. Are you willing to pay higher
premiums for more choices?
- If your physicians are in the plan.
- Make sure the plan covers both physician visits and hospitalization.
To keep costs lower:
- For individual insurance plans, take a higher
deductible — the amount of money you must pay
before the health plan begins to pay for
covered services — especially if you and
family members are in generally good health.
- Participate in your employer’s group medical
plan if one is available.
- Maximize any preventive care benefits such as
an annual physical exam, flu shots, etc.
Disability income insurance provides you with an income
if injury or illness prevents you from working. You
should not overlook this form of insurance.
Here is what you need to know.
Types of plans are listed below.
Employer
- Many employers provide disability coverage,
often at little or no cost to employees.
- Since employer coverage may be limited, you may
want to supplement this coverage with an individual plan.
- If your employer pays for the plan, you will pay federal
income tax on some or all of the benefits.
- Employer plans usually provide coverage for no
more than two-thirds of your current income. For a
longer term disability, coverage is usually for no
more than 50% of your current income.
Individual
- You can purchase an individual disability
insurance plan through an insurance company.
- If you are supplementing an employer plan, make
sure you purchase an individual plan that will
provide payments at the same time you are
receiving group plan payments.
- Benefits you receive are not subject to federal
income tax if you and not your employer are
paying the premiums.
- Individual plans usually provide coverage
for no more than 70% of your current income.
Choosing A Plan
Review a copy of a plan’s Summary Plan Description (SPD),
which describes the plan’s benefits fully.
- The length of coverage — some plans provide coverage
until retirement age, some for life.
- The plan should be guaranteed renewable — the
insurance company cannot end your coverage,
although premiums can increase.
- The plan should be noncancelable — the rates are
guaranteed not to increase and the plan cannot
be canceled as long as the premiums are paid.
- Consider extra features — cost of living adjustments,
automatic increase in benefits and guaranteed insurability.
To keep costs lower:
- Choose a longer waiting period before benefits begin.
Be sure to have enough money available for that
period of time when you are not receiving benefits.
- Check policy exclusions carefully.
- Check to see if you are covered if you can no longer
perform your current occupation or if coverage is
only provided if you cannot perform in any occupation.
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Basic Money Management
Basic Money Management
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