We need it; but, we only want to hire the insurance company to cover the amounts that we can’t or choose not to cover.
If you are over 50 years old, you may want to have long-term care insurance. With the new partnership plan (available in most states), they make it more beneficial for you to own long term care insurance. When you are purchasing, or if you have it already, MAKE SURE YOU KNOW WHAT YOU HAVE. Your long term care insurance should cost at least the same amount as your house insurance annually. The longer you wait, the more expensive the premium will be.
If you do have dependents, you may need a lot of insurance (average family with two children and a $120k combined income needs $500k worth of coverage on both parents). Term insurance is less expensive than whole life or universal life.
Coverage for children. If you want to do something to ‘cover’ them, cover their college cost with a 529 plan with that same money.
If you have people depending on you or you are single and own a home, you need 8 months of your income to fall back on and you should have disability insurance. It is usually beneficial to purchase this through work because it is typically cheaper.
In the case of house insurance, a high deductible is usually recommended. A 1% deductible means you would have to come up with the first $2,000 (if the house is worth $200k) but it also means your premiums will probably be reduced by a third annually. Reducing your house insurance premium may allow you to invest the money elsewhere. Of course, you may need an emergency cash fund available to do this.
In the case of car insurance, the difference in premium between a $250 deductible and a $500 deductible is usually made up by premium cost savings in a matter of 2 years. Like house insurance, the reduction in premium means you may have more money to put elsewhere.
Again, remember that insurance is a business. They have done all the actuarial work and know what the risks are. Manage your risk. Manage your cost. Save the difference.
To learn more about what types of insurances are right for you, please contact a Creating & Managing Wealth representative.