Insurance provides financial protection against the possibility of loss. Over your lifetime, your obligations shift, and the types of losses you could suffer change. That’s why it’s crucial to make sure your insurance continues to meet your needs. Here’s our guide to your changing insurance needs.
Life insurance protects a surviving spouse, family member, or other dependents. It can provide income replacement or help cover other costs. For example, for families with children where one spouse stays at home as a caregiver, a life policy can replace the wage earner’s income in the event of their death. It can also provide funds for childcare costs should the covered caregiver die. (By some estimates, stay-at-home caregivers contribute the equivalent of nearly $150,000 in salary.)
When you are married with children, you need life insurance to cover the indebtedness. Additionally, many experts advise wage earners need insurance to provide the surviving spouse an amount equal to at least ten years of the wage earner’s annual income, plus funds to pay for college for each child. If you divorce, you must consult your insurance agent about your changing insurance needs.
If you cosign college or other loans for your children, it may be advisable to take out a policy on them so that if they die, you have coverage to pay off the loan obligation.
Later in life, after you have accumulated significant savings, your house and car are paid off, and your children are grown, you can cut back on life insurance to provide a smaller payout to your surviving spouse, cover final expenses, and perhaps provide some funds to your beneficiaries. Some experts advise that you can even give up all life insurance in this situation, depending on how much you have saved.
Keep in mind that life insurance isn’t just for families with children. If you are single, you need life insurance to pay family or friends who would manage your obligations — health care bills, funeral costs or debts such as a mortgage or car loan — if you died.
Because of changing insurance needs, it’s advisable to stay in touch with your insurance agent for advice on the amount of coverage you need.
Today many people get their health insurance through their employers. Should you become unemployed or have a gap in coverage before a new employer’s plan activates, however, contact the health insurer about COBRA coverage. Those without employer coverage can shop independent insurers for coverage.
When you turn 65 and become eligible for Medicare Part A through the federal government, contact a health insurance agent about private Medicare Parts B, C, and D plans.
Renters and homeowners insurance
When you rent your housing, renters insurance protects you in two ways. First, you need coverage for personal property such as furniture, computers and clothes you could lose in a fire or similar event. Second, you need liability coverage that pays in the event you cause damage to the owner’s rental property. For example, if you cause a fire or leave a faucet running that floods the house, your renter’s insurance will cover the cost of repairs.
When you stop renting and buy a house, you need homeowners insurance. These policies cover repair or replacement if perils such as fires and storms cause damage to your house. Homeowners insurance also covers the cost of replacing your belongings and staying in temporary housing while your home is repaired. Finally, it covers your liability costs if a guest is injured on your property.
Your mortgage lender requires you to have an adequate amount of homeowners insurance. Even if you do not have a mortgage, you should carry sufficient coverage to avoid significant out-of-pocket expenses.
Your homeowners insurance needs can change over time. If you sell and buy a new home, you’ll need to cancel your old policy and buy coverage on your new property. If you increase your home’s value by remodeling, you need to increase your homeowners coverage. And if you refinance your mortgage, you’ll need to notify your insurance company of the new lender and supply that lender proof of coverage.
All drivers need auto insurance. It covers your liability should you be at fault in an accident, paying for damage to the other driver’s vehicle, damage to other property that may be hit, and medical costs for injuries to the other driver and passengers. Collision and personal injury coverage pay for damage to your vehicle and the cost of injuries to you and your passengers.
When your children become eligible to drive, your insurance needs to change. Add your children to your policy (and brace yourself for the cost). When they become adults and pay for their insurance, you can drop them from your policy.
If you start a business, talk to your agent. You’ll need coverage for property and equipment and perhaps life coverage for you and any partners in business with you.
Getting an umbrella liability policy to cover damages and injury costs that exceed the limits of your auto and homeowners policies is also advisable. This is especially important when you add teenagers to your car insurance.