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Protecting Myself

Insurance

The safety net for your net worth

Insurance is a topic that's misunderstood by many people, even those who have it. Ultimately, insurance is a way to transfer risk of financial loss to your insurance company. The cost of transferring that risk is the premium you pay.

If the policy fits

There are a variety of types of insurance.

Health insurance protects against every day and catastrophic medical costs.

Auto Insurance pays for the damage to your auto, other property damage or personal injury due to an auto accident.

 

 

Renter's Insurance covers the loss or destruction of your personal property from fire, theft, etc. while you’re renting.

Homeowner's Insurance pays to repair or replace your home and its contents in the event of fire, theft, etc. You may want additional protection, depending on where you live, for earthquakes, floods, etc..

Disability Insurance is used to replace part of your earned income while you can't work due to illness or injury.

Life insurance is for the financial security of your family in the event of premature death.

Liability Insurance provides additional liability coverage beyond that of your auto and homeowner's coverage for property damage or injuries to others you cause.

Feel good about health insurance

Group health insurance

Offered through an employer, it’s usually much less expensive than if you purchase as an individual. Generally employers subsidize your premium payments and you choose from a variety of plans with a wide range of benefits, coverage and costs.

Flexible Spending Account (FSA) and Health care Spending Account (HSA)

These may also be offered through your employer. You pay for eligible medical expenses on a pretax basis and thus can get significant tax savings. One major difference between FSAs and HSAs is that an individual controls an HSA, while FSAs are less flexible and are owned by an employer. So if you leave your job, the funds within the FSA will likely be forfeited, while any funds deferred into your HSA are yours to keep and roll into another HSA.

Consolidated Omnibus Budget Reconciliation Act (COBRA)

If you lose your job, you may be able to remain on your former employer's group policy for 18 months at your own expense to give you sufficient time to research and find coverage elsewhere. COBRA also allows 36 months of coverage if you get divorced and your spouse provided health care coverage.

Individual health coverage

While it might be expensive, if you don’t have access to group health insurance, it's critical to get an individual plan. A minor accident or illness can cost many thousands of dollars.

The Affordable Care Act, which was signed into law in 2010, was designed to help people better understand and evaluate their health insurance choices. Learn more.

Tip

If you're married, be sure to review your spouse's plan, as it might offer additional benefits. Compare your plans and see which one best fits the needs of your family.

man at desk

The facts about life insurance

If you have a spouse and children, this may be important coverage for you. It will allow you to replace income or provide financial support for your dependents if you or your spouse dies prematurely. Premiums are typically less expensive if you buy at a younger age.

The most common types of life insurance

Term life insurance

Coverage

  • Only for a certain period of time

Premium

  • Requires annual premium; may increase substantially at later ages

Death benefits

  • Fixed

Cash value

  • Does not build cash value

Other

  • Coverage may not be renewed after a specific age, such as 75 or 80

Permanent life insurance

Coverage

  • Intended to be held for your lifetime

Premium

  • Premiums may be for life or a specific period of years

Death benefits

  • May vary based on premiums, investments, etc.

Cash value

  • May build cash value

Other

Several types to choose from

  • Whole life: fixed premiums, guaranteed death benefit
  • Universal life: flexible premiums, variable death benefits
  • Variable life: flexible premiums, self -directed investment choices, variable death benefit

Deductibles vs. premiums

There's a broad range of insurance products to choose from, and most have flexibility so that you can customize the coverage to fit your individual needs and budget. In many cases, you can manage your premium costs by balancing coverage and deductible.

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