Buying life insurance is an important part of financial planning — but understanding insurance and buying the right product can be tricky. From whole to term life, riders to convertibility clauses, how do you make sense of all the choices?
Most people rely on the expertise of their insurance advisor, broker, or sales representative to help them make the right decision. Yet, for some people, insurance representatives have developed a bad reputation, and many people do not trust the "recommendations" they receive.
Many of you have asked for life insurance information, so Ray from Financial Highway offered to provide this guest post on the subject. This is new info for me, too.
Protecting your family from financial disasters is one of the fundamental components of financial planning. Life insurance should be a core part of that planning process. This article is a basic primer on life insurance, which should introduce you to the concept and give you an idea of how life insurance works.
What is Life Insurance?
Most people have a basic understanding of insurance. You receive financial compensation when an insured event occurs. Consider auto insurance, for example. If your car is in an accident or stolen, your insurance company provides compensation according to the terms outlined in your insurance policy.
This is a guest post from Amanda, a Colorado tech writer and an activist for children with congenital heart disease. This article is about Amanda's personal experience with insurance. It's not a prescription for other people, but insights into the value of insurance in her own life. It's her hope that it will get you thinking.
There was a time in my life when the thought of insurance made my eyes glaze over. I've never been one to want to read details in insurance contracts, license agreements, etc. I also don't always enjoy thinking through potential unpleasant situations. So, when it comes to buying and using insurance, I've learned some lessons the hard way.
I've made some mistakes with my car insurance, for instance. When I bought a second car to drive to grad school several years ago, I thought, "No, I don't want to pay $3 extra a month for rental car coverage because we have two cars." A few months later, I rear-ended a woman on the highway going 45mph. It took a while to get my car back, and my insurance went up a lot. But it also made it difficult for my husband Jim to get back and forth to work while I used the other car for work and school.
In America's current healthcare system, in most cases, you're better off with the crowd. Usually, that crowd is your employer or a government pool like Medicare or Medicaid. But sometimes, due to choices you make, or circumstances you can't control, you end up on your own, with full responsibility for your healthcare expenses. Here are some circumstances under which you might end up needing to seek affordable individual health insurance:
- You lose (or quit) your job.
- You have insurance through your spouse or partner, and they lose or quit their job.
- Your employer or your spouse's stops offering insurance for you or your family.
- You change jobs, and your new employer has a waiting period before you become eligible for coverage.
- You take early retirement.
In some other circumstances, you may have the option to participate in group medical insurance, but it's not in your financial interest to do so.
- You are young and healthy, but your employer group has a lot of older, sicker people in it, and your employer makes you bear much of the premium cost for either yourself or your dependents. Keep in mind that if you find yourself in this situation and you opt for your own insurance, you help yourself, but also make it harder for your employer and your co-workers to afford coverage.
- The group plan you are eligible to participate in doesn't meet your needs. For example, it does not cover doctors or hospitals where you live, or it does not cover particular health condition that you have or are at risk for, or the plan offers richer benefits than you want to pay for.
In any event, if you are shopping for individual health insurance, you need to keep in mind several important things.
This is a guest post from Suzanne S. It's very long, but it's about an important topic. You may want to bookmark it for later reading.
Personal finance isn't just about growing your finances — it's also about protecting what you have. Most experts advise insuring your home, your car, your health and your life. What many of us never get around to doing is insuring our earning power.
According to The Wall Street Journal in a December 2006 article “The Growing Appeal of Disability Insurance”:<
This is a guest post from Aaron Pinkston. He used to help other insurance agents understand insurance. Now he prefers dealing directly with the public.
Insurance is an oft-misunderstood financial tool. I feel like it's my responsibility to help folks out with their questions when I can. Don't get me wrong, I don't think I'm the patron saint of insurance, but I do think the world would be a slightly better place if I could help people save money, improve their coverage, or understand their coverage better.
A quick note: I am not giving out tax or legal advice, and you shouldn't think I am. The advice I have to offer through this site is generic only because the audience is so diverse. If you have specific questions, you should consult a financial planner or insurance specialist.
My friend Lynn works for a major U.S. insurance company. I recently asked her for tips to help people save money on auto insurance. I expected maybe a few quick ideas, but she went above-and-beyond with the following detailed list. If you own a car, you should read these tips. For readability's sake, I haven't blockquoted this, but it's all Lynn.
Note that every insurance company is different — not all of these ideas work everywhere. The first thing you can do to save money on auto insurance is to self-insure as much as you can afford. Do this in the following ways:
- High deductibles. Everyone preaches this, yes, but it's usually the easiest way to cut costs. Usually. (If your car is over ten years old, the savings may be minimal.)
- Remove towing. Good maintenance and planning can save you money. Don't run out of gas. Don't lock your keys in your car. Make sure you have a spare and know how to change it. Sometimes your car will break down, but if your car is well-maintained, it won't happen often. You pay $10 - $30 a year over the life of your policy and one tow costs $100. Note that in the event of an accident, towing is almost always covered under collision.
- Remove car rental. Small economy cars cost about $20 - $25 per day to rent. Car rental is $20 - $40 per year. Play the odds. If you rent a car on vacation, your insurance will cover you while driving that car. Don't pay for the extra coverage. The only things it offers are:
- Zero deductibles. You go all year long with your deductibles, why change now? Also, if you pay for the car with a credit card, they may pay for any out of pocket in the even of an accident.
- Downtime coverage. Downtime means that while the rental car you wrecked is in the shop being repaired, it can't be rented out to other customers and they can ding you for the daily fee. This may be an issue if they can show that all other cars were rented out and they lost money because of you — Hawaii is notorious for charging this. But, again, it's a risk you might decide to self insure rather than pay $21 a day for the insurance.
Aside from self-insuring, there are other steps you can take to save on car insurance.