Mo Vidwans
Last month we reviewed life and disability insurance. Let us continue with more kinds of insurances that we need and deal with in our everyday life.
Health- Health insurance is a much talked about subject; even in this column it has been touched upon on many occasions over the last year. Health insurance is one that we must have. Contrary to life and disability insurances, the need for this one does not diminish but grows with age; in fact, we use it much more when we are older.
Those who work have health insurance through the workplace and the retired people are taken care of by Medicare and other private insurances (refer to the month of July article). Since we all know about this particular insurance, I will just mention a real useful new product on the market; this is the way most of the corporations would go, it seems, in the future. It is called Health Savings Accounts (HSA) and is being used by 43% Corporations today.
We can open an HSA if the workplace has a High Deductible Health Plan (HDHP). Many overlook this even though it is the most tax-deferred account available (better than even an IRA or 401K). HSA allows you to set aside pre-tax money (for 2016 it is $6750 for a family) without paying state and federal taxes on it. If you contribute through payroll deduction you also save on FICA tax; besides, the corporation would contribute to it too. Money in HSA grows tax-free and, if used for medical expenses, also can be withdrawn tax-free. The biggest advantage of HSA comes when all the money set aside is not used that year; it can be carried forward till your age of 65 after which you have the rest of your life to use it for medical purposes.
Home Insurance
Most of us own at least one home as a necessary part of our passage of life and then we must have home insurance by decree of city/county/state/federal laws. Nobody would let us purchase a house unless we show that we have insurance. Like I mentioned last month this is one insurance we must have and hope that we never have to use it. Home is not covered for unnatural events like flooding, backed up sewers, faulty products etc. unless we have special riders. Also home should be covered for the “replacement value” and not the one you bought it for. One can reduce the premium considerably by taking a higher deductible; premium can cut in half if we increase our deductible from $1,000 to say $5,000 or higher. It is also a good idea to cover, via various riders, for special articles of interests like jewelry, heirlooms, china and special equipment used for photography, music and so on. Apartment dwellers, too, need to have insurance for their belongings.
Automobile Insurance
Since we cannot do without cars this is another one of those where having insurance is a must. Most states have laws about minimums on a variety of factors in automobile insurance like liability, uninsured drivers and deductibles for comprehensive and collision. I strongly recommend that do not just pick insurance with the minimums; premiums really do not increase substantially for higher coverage. Also road assistance and rental car coverage usually does not cost more than few pennies a day but are very helpful in case of trouble especially with one car families.
Shopping around for auto and home insurance is a good idea, if not every year then at least every few years. You would be pleasantly surprised how much the insurance premium varies for the same coverage from one insurance company to another. We get complacent with our agents especially if we have a cozy relationship with them and know them well but you can save hundreds of dollars every year by shopping around. Also they give multiple discount when you have home and auto insured with the same company.
Umbrella Liability Insurance
Virtually every middle class family has assets to protect and they should be protecting those assets with umbrella liability policy. Without this coverage, individuals and families face the possibility of losing a lifetime’s accumulation of capital and other assets if they are seized to pay a legal judgment. This policy protects families in two ways: high limit over underlying insurance and broadened drop-down coverage over a self-insured retention. Generally, this policy would not cost more than $250 per annum.
Professional Liability Insurance
There are many families who are developing their own businesses, either both spouses together or occasionally just one spouse with generally between 0 to 10 employees. Given these circumstances it is always a good idea to consider some protection for liability for the owners especially if the business is small and still budding.
This insurance is often referred to as Malpractice Insurance for those occupations in which professional liability is likely to result from errors, omissions, unsatisfactory professional performance and other misjudgments and for some businesses bodily injury too. Professional liability covers many areas like company officers’ liability, employment practices, employee benefits and fiduciary liability insurance to mention a few.
Commercial Property and Liability insurance
Many families and individuals have businesses in commercial or for that matter residential property. Even though a precise breakdown for such types of coverage is difficult because terminology and insurance company practices are not uniform, it will be safe to say that it is wise to have insurance coverage for whatever your liabilities would be in your business. In each business it is a must to know what your possible perils are, imagined or real, and then how they need to be covered.
Insurance for a variety of things/events should not be and, at times, cannot be ignored. Think of the unknown and decide what insurances you must have. Again insurance is one thing you must have and hope that you never have to use it.
