Updated: 11/2/2011 7:48 PM ET|
Vital insurance questions answered
Other ways to cut costs:
- Drive safely (drivers with good records get better deals).
- Insure every car you own with the same company (packages that cover multiple vehicles often mean lower premiums).
- Don't smoke (statistics show that smokers have more accidents than nonsmokers).
- If you're still in school and pulling down good grades, let your insurer know it (good marks sometimes cut premiums).
8. What about life insurance? Do I have to have that?
Does anyone depend on you financially? In its most basic form, life insurance covers a person's income. If no spouse, child or parent is depending on your income, then life insurance is optional. If you're married, or there is someone whose well-being depends on what you make for a living, life insurance can prove an essential form of protection.
There is one wrinkle that goes against the maxim "no income, no insurance." If one spouse works and the other stays home with kids, consider taking out insurance on the parent at home. Should he or she die, the death benefit could cover the hefty expense of child care.
9. How can I figure out how much life insurance I need?
It's something of an inexact science, but try MSN Money's life insurance calculator.
10. What sort of life insurance should I consider?
Term life insurance is best for most people. It's the cheapest and simplest insurance you can get. You pay the premium and you're insured. It's particularly effective if you follow the time-honored wisdom of investing the difference between what you pay for term insurance and what you would pay for "whole life," or cash-value, insurance. If things work out, your investment program will leave you with a large cache of cash.
11. So I should never buy anything but term life insurance?
It's not quite that cut-and-dried. If you doubt you'll be able to invest the difference, cash-value programs are a form of forced savings. Some are tied to mutual funds that can offer reasonable rates of return. And, because life-insurance death benefits are exempt from taxes, they can prove an effective strategy for passing along assets to your heirs. The downside to most cash-value plans is that they're more expensive than term insurance, and you have to hold on to them for a set number of years so you're not hit with heavy "early surrender" charges.
12. Health insurance is something I can't do without, right?
Correct. According to recent Census data, more than 46 million Americans lack health insurance. Make sure you're not one of them. Many employers offer health insurance to employees at group rates. Plans boil down to two options: managed care and fee for service.
With managed care (HMOs, PPOs and the like), the employee is responsible for a co-payment, generally between $10 and $30, for doctor visits and other services. In exchange, the program specifies certain physicians from which you may select. Managed-care programs are infamous for making you wait days and even weeks before getting in to see someone.
Fee for service, on the other hand, carries more expensive premiums than managed care. The major advantage is that you can generally go to any doctor you want. Fee-for-service policies usually pay 80% of patient expenses after deductibles, and you are responsible for the remaining 20%. Like other forms of insurance, you can trim fee-for-service premiums by increasing your deductible.
If you're self-employed, or your employer doesn't offer health coverage, make certain you get something in place.
13. What exactly is COBRA?
COBRA stands for the Consolidated Omnibus Budget Reconciliation Act of 1985. Under COBRA, if you resign from a job or are terminated for any reason other than "gross misconduct," you can continue to be covered under your former employer's health care plan for up to 18 months. In many cases, spouses and dependent children are also eligible. The downside is that the premiums are expensive -- in effect, you're paying both your share and that of your former employer. The idea of COBRA is to remain covered until can you arrange for some other sort of health insurance.
14. Does health insurance help if I'm sick or injured and laid up for a while?
Partially. Health insurance helps to pay only your medical expenses. Disability insurance is what keeps income coming in if you can't work for a time. This is one of the more commonly overlooked types of insurance, and one that most working families really need. It pays you an income if you're incapable of generating your own for any period of time. Some employers offer it, but in many cases, you'll have to get it on your own. Look for policies whose waiting periods are no longer than 90 days. This is the time you have to wait until you start getting disability payments.
15. What about long-term care?
Long-term-care insurance helps pay for nursing care and other like expenses when you get older. That's a good thing, no doubt about it. But the premiums are expensive -- the average annual premium for a 55-year-old couple in good health is $2,350, according to Jesse Slome, the executive director of the American Association for Long-Term Care Insurance -- and grow as you get older. So you have to consider whether you can genuinely afford the increasing premiums.
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These articles are nice but really contain junk advice. Their benefit is in raising awareness, and no more!
condisder this - If you had a serious medical problem would you take advice from a newspaper column? No. Well proper insurance is serious stuff - unprotected, you could lose EVERYTHING you own and more.
So, If you have no assets, no dependents, no money, then take your advice from the column.
If have some assets, a reasonable income, and care about your retirement years - then consult a professional. (or two).
*Property & Casualty agents specialize in insuring your THINGs (home, auto), and
*Life insurance agents specializes in insuring PEOPLE and their incomes.(Life, Disability Income, and Long Term Care insurance).
Although many agents carry licenses to sell both types, these are two different disciplines. (by analogy - even though they are both MD's, you go to a cardiologist for heart problems and a dermatologist for skin issues!)
As a 20 yr professional agent, More and more I see the horrors of improper planning, a result of following 'one size fits all" advice such as this one.
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