Published March 31, 2008 by
Next, review your insurance policies. For many people, life insurance is a kind of instant estate; its guaranteed financial protection for your family.
Term life insurance [temporary; bought for a specified period of time, or term] is often purchased by younger people who like the low initial premiums. Remember that premiums for term insurance rise slowly through your thirties and more quickly thereafter. For people in their sixties and beyond, term insurance rates may be out of reach.
Whole-life insurance [permanent; for your “whole life”] rates are about five times higher than for term insurance, but the premiums remain level from the date of issue. Additionally, the whole-life policy acquires a cash value that increases over time.
You may want to look into newer types of life insurance that combine term and whole-life. Such a policy typically will combine at least $10,000 of whole-life upon the head of the household with at least $50,000 of term insurance, all for a single premium. Another innovative policy is adjustable life insurance, which allows the policy-holder to raise or lower the amount of insurance and vary the type of insurance between whole-life and term, as life’s circumstances change.
If you or your spouse is staying home or working part time, that person should also consider buying a term policy that would cover the daycare expenses that would result in case the stay-at-home parent dies.
What about your health insurance? Many companies now offer membership in a health maintenance organization [HMO] as an option to the usual health insurance. You should definitely consider taking advantage of this corporate gift if your company offers it. HMO s are corporations that contract with physicians and hospitals to deliver health care under a prepaid plan. With these plans, employers can offer their workers enhanced benefits at prices comparable to traditional insurance. Joining a HMO can make sense, particularly to a family whose members seem to be running to the doctor’s office every other week. The costs of office visits, prescriptions, vaccinations, diagnostic tests, and hospitalization are often covered by an HMO plan. Keep in mind that you have to use the HMO’s doctors and hospitals, so if you have a doctor that you particularly like, an HMO may not be for you.
A new wrinkle in employer-or insurance-plan-pondered health care is the Preferred Provider Organization [PPO]. As with an HMO, a PPO plan provides discount health care to members, offering co-payment arrangements and other incentives. Typically, members contribute through payroll deductions. As a PPO member, you can choose your physician and hospital from those included in the PPO group. Fees for services are covered one hundred percent. If you wish, you can choose an outside [nonmember] physician or hospital, in which case you will be liable for a percentage of any fees. Obviously, what makes PPOs appealing is that a member can pick his or her caregivers.
Check to see if you have adequate protection through work or Social Security in the event you become disabled. If not, find out if you qualify for auto insurance that provides benefits for disability from traffic accidents, or for special private insurance programs that pay monthly loan or mortgage payments during a disability. There are different definitions of what disabled means; an insurance agent should explain exactly what “disability” means in the policy. The agent should also explain the policy’s “renewability,” or the conditions of extending the policy beyond its expiration date.
The whole point of insurance is to cover the “just in case” situations; you want to be sure your policies are appropriate for a family with young children.