October is Organize Your Medical Information Month, when consumers are encouraged to create a detailed medical information and family health history. The goal is to help prevent medical errors and give people the knowledge they need to make positive health changes. (To help in this process, download My Family Health Portrait from the U.S. Dept. of Health and Human Services and Your Family Health and Medical Record from the Texas A&M AgriLife Extension Service.)
It’s also the ideal time to take a look at your insurance policies, making you sure you understand what type and extent of coverage you have and evaluating whether you need to make updates based on changes in your personal situation. Not sure what you need to be looking for—or at? Here are some quick tips to help you through the process.
Insurance and your life stage
Where you are on the life continuum has a definite bearing on your insurance needs. For example, if you’re a young married-with-kids couple struggling to balance your income with outgo, college and retirement may seem far in the future. But time passes quickly, so you want to develop a strategy that includes insurance, savings and investments to cover all the bases.
You also want to be sure the family will be provided for in the event of a catastrophic illness or untimely death of either you or your spouse. Even stay-at-home spouses should have coverage, since their contribution to the operation of family household would need to be covered in the event of their death. (For an example of why this is so important, watch Dennis and Jodie Danduran’s story). Policies can be economical at this time in your life, since the younger the insured, the lower the premium cost for the same benefit amount.
For those at life’s midpoint—kids are gone but retirement is still a decade or more away—you are most likely now in your peak earning years. Your goal is to make the most of this time to increase your financial stability by saving aggressively for retirement, while protecting yourself from unexpected setbacks, by evaluating the extent of the life insurance coverage you have and whether the amount would be sufficient to support your spouse in the event of your death.
Disability insurance and long-term care insurance are two other options you should consider. Disability insurance provides an income to you and your family if you are unable to work because of illness or injury. According to a study conducted by LIFE, half of working Americans couldn’t make it one month before financial difficulties would set in, with nearly one in four unable to make it a week. Also, keep in mind that Workers Compensation only pays for work-related injuries, while the vast majority of long-term disabilities are not job-related.
As for the cost of long-term care—an increasing concern for middle-aged and older Americans—the average cost per year in a nursing home is more than $80,000, with home care costing $20,000 to $30,000 annually for just five hours of care each day. Add in the expense of skilled caregivers such as therapists, and you could see your retirement and savings wiped out before you know it. Your insurance professional or financial advisor can help you assess if long-term care insurance is appropriate for your income bracket. (For more about personal experiences with disability insurance, watch Barry Shore’s story and for long-term care insurance, watch Lynda Striepe’s story.)
Is retirement just around the corner? Or perhaps you have already closed that chapter of your life and are preparing for a new one. With this stage potentially lasting several decades, you want to make certain that you have enough to keep your “golden years” from tarnishing. A lifetime annuity can function as a do-it-yourself pension plan, providing regular payments in exchange for an investment of a lump sum of money.
For those 65 or older, while Medicare is now your primary insurer, there may be still expenses that are not covered, such as coinsurance for skilled nursing care and hospice stays or emergency overseas medical care. Consider purchasing a Medicare supplemental, or Medigap policy, to supplement your Medicare coverage. (For more information, visit this page.)
What else to consider
While your life stage definitely has a bearing on the type and extent of insurance coverage you have, there are other factors that can have an impact. Here are some additional questions to ask yourself as you evaluate your current policies and your future needs.
- Do I have more—or fewer—dependents who would be financially affected by my inability to work or by my death?
- Do I need to update the beneficiaries on my policies?
- Are there riders or options I should add to my life policies, such as an accelerated death benefit or conversion option?
- Do I need to increase my coverage amount to ensure my family’s current style of living is protected?
- If I’m a small-business owner, do I have the following in place: a disability insurance policy, buy-sell agreement and key person insurance?
For help making the right choices when it comes to insurance vehicles, schedule a policy insurance review with your insurance agent or a financial professional.
Finally, make two copies of your insurance policies, storing one at home in a fireproof safe or file box and the other off-premises such as in a bank safety deposit box. Create a master list of your policies (policy number, benefit amount, insurance company and agent contact information) and provide this to a key family member and/or your executor along with their location.
Now is the best time to get your insurance “house” in order!