Friday, November 13, 2020

Are Your Finances Ready For Disaster (Part 3 - Insurance)

By Timothy Gamble 

If you haven't read it yet, Part 1 of this article discussed Emergency Funds, and Part 2 covered Important Documents. 

Part 3 - Review Your Insurance

Insurance is a boring subject. It can also be complicated and confusing. And expensive. It might also seem like a waste of money if you never have to use it. But, insurance is important, and can be a real financial life saver when you actually need it. Here's a quick review of insurance you may need. 

Homeowner’s or Renter’s Insurance - If you have a mortgage, your lender probably requires you to have homeowner's insurance. They probably also dictate certain minimum requirements for the coverage. But you get to choose the company and specific policy coverage you use, subject to those minimums. Review your policy every year, and make sure it is current and sufficient. Remember, property values tend to rise over time, as does the cost to replace your home. So, if you have the same coverage you had ten years ago, it may not be enough to replace your home in today's market. This could also be true if you've done major improvements or additions to your home. If you don't know your home's current value, work with a real estate agent or appraiser to determine its value and replacement cost. 

If you rent instead of own, you may want to consider renter's insurance, even if your landlord does not require it. Renter's insurance covers your personal property, such as furniture, jewelry, and electronics, in the case of fire, theft, or many other perils. Liability coverage is also included in standard renter’s insurance policies, which provides protection if someone is injured in your home. Review your policy every year, and make sure you are comfortable with its limitations. 

Flood and Earthquake Insurance - Many people are unpleasantly surprised to learn that standard homeowner's and renter's insurance do not cover damage from flooding or earthquakes. Flood and earthquake insurance are extra. If you live in certain areas, you may be required to carry these. If not, carefully consider if you should have one or both. Make sure your coverage is adequate for your home and belongings.

Pro Tip for Dealing with Insurance Companies

Take a complete inventory of your personal property. Have a list, including serial numbers when possible, as well as photographs (or a video) of your belongings. This includes any valuable jewelry, antiques, and collectibles, in case they are destroyed. Don't forget your guns. Preppers, survivalists, and homesteaders typically have more tools and other supplies than the average person, so an insurance company may doubt your claim unless you have proof of what and how much you had. This list and photo record will help if you need to file an insurance claim. Make sure that you have enough coverage to replace these items. 

Consider keeping records and photos of your car, too, especially if it is an older vehicle that you keep in excellent condition. Many years ago, a man hit and totaled my car which was sitting in a parking lot. It was an older vehicle, and when his insurance company tried to settle with me, they gave me a real low-ball offer. But the car was in excellent condition, and I had the receipts to prove it had been kept in excellent condition, including the receipt for a new set of tires purchased only weeks before. Because of this proof the insurance company upped their offer by $800.

Life Insurance - Life insurance is important at all stages of life. It can cover funeral costs, pay off medical bills that surviving family members may otherwise be stuck having to pay,  pay off debt owed by the estate, and provide living expenses for a surviving spouse and children. Even young, healthy people may die unexpectedly, which is not only devastating emotionally for surviving family members, but is potentially devastating financially, too.  Making sure you have adequate coverage for your personal circumstances is crucial. Be sure to review your coverage yearly, as your circumstances and needs change throughout life. 

Get started with this article on What Is Life Insurance and How Does It Work? It explains what life insurance is, and how it works. The article also goes into the different types of life insurance, who needs insurance, and how to decide how much insurance you need. (I am NOT affiliated with Dave Ramsey or his company, other than being a fan.)

Health Insurance - Our health care system is expensive and, frankly, screwed up. Health insurance is extremely expensive, and the Affordable Healthcare Act (Obamacare) actually hurt more people than it helped. Your first, best, and cheapest option is not to get sick. Taking care of your health is extremely important, and is financially worth the time, effort, and expense. Most of us, including me, could take steps to improve our health and fitness. But, even healthy, fit people eventually need a doctor. What, then?

If your employer pays for your health insurance, that is great. If not, you have to navigate the confusing and expensive world of health insurance yourself.  Do not just ignore it. Start with this Dave Ramsey article: How to Save Money on Health Insurance.  If you are self-employed, check out the article How Do You Get Health Insurance if You’re Self-Employed? (also on Dave Ramsey's website). Unemployed due to Covid-19? Health Care Options for the Unemployed During COVID-19.

Car Insurance - If you own a vehicle or drive, you are required to have insurance. The minimum requirements vary state-to-state, and if you are making payments on your vehicle your lender will also have certain requirements you must meet. However, you get to choose where you get your insurance, and the cost of coverage varies HUGELY from company to company. It pays to shop around for the best rates. Do this every time your policy is up for renewal.  

Potential Money-Saving Tip: You may be able to save some money by bundling insurance policies with the same company. For example, many companies offer both homeowner's and auto insurance. In many cases, you could get up to a 10% discount by buying both policies from the same company. 

Part 4 of this article will be posted on November 22, and will cover Wills.  


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