INSURANCE CENTER
Insurance is a complex subject. Do your own research or work with your agent. United Financial Services can quote life, long-term care, Medicare supplements, disability, as well as umbrella policies for our clients.
Hopefully this introduction will provide a comprehensive overview of your options.
INSURING YOUR FUTURE
The purpose of all insurance is to protect yourself or your family against the financial impact of a tragedy. Insurance is not to help you budget moderate-sized expenses, but to protect you against the truly catastrophic.
STEPS FOR BUYING INSURANCE
Use these steps when buying insurance.
- Do I need this type of insurance at all? Determine what the type of insurance you are considering covers and decide whether you need it.
- How much insurance do I need? Policies vary in how much they cover. Some cover specific dollar amounts; others cover percent of loss. Some have a deductible; others exclude certain types of damage. Look at these differences among policies, and decide which one is for you.
- Where will I buy it? When selecting a company, determine whether the company is both able and willing to pay on claims should you make one.
When buying any insurance, you will most likely save money if you pay annually or semi-annually. Sometimes buying several types of insurance from the same company will save you money.
LIABILITY INSURANCE
When shopping for insurance, you should forget about specialized insurance advertised on television with paid endorsers. They usually cover very little.
HEALTH INSURANCE
A generic term applying to all types of insurance indemnifying or reimbursing for losses caused by bodily injury or sickness or for expenses of medical treatment necessitated by sickness or accidental bodily injury.
Don't go without this. Most people have it at work, but if you don't you will really save big by going for a group policy. When comparing policies, consider deductibles and what is or isn't covered. When given a choice, choose one that covers the huge, debilitating conditions over one that is good about routine immunization, but that balks at the larger, more expensive claims.
Health insurance comes in three types, though many policies mix and match traits of the three. Options include the low-cost Health Savings Account, eligible high-deductible plans, to full benefit-rich plans such as Point of Service and HMO’s.
- Fee for service, the most expensive, allows you to go to almost any provider and covers almost anything that is medically necessary. You don't have a primary care physician who has to approve visits to specialists.
- Preferred Provider Options (PPO's) allow you to self-refer to any provider in the PPO's list and generally cover a wide variety of services recommenced by those providers. Some PPO's cover other providers, but with a larger co-payment.
- Health Maintenance Organizations (HMO's) are the least costly, but the most restrictive. They assign you (or let you select) a primary care physician. That physician acts as a gatekeeper in that (s)he decides what is medically necessary and when you may see a specialist. Often the HMO itself has to permit certain treatment and can rule against your doctor if it thinks the treatment is too costly.
DISABILITY INSURANCE
Individual disability insurance is truly a basic concept. It is an insurance product designed to replace anywhere from 45-60% of your gross income on a tax-free basis should a sickness or illness prevent you from earning an income in your occupation. Every disability insurance policy from every insurance company is very different. This is not a product to simply shop for the most competitive rate. To buy the cheapest disability insurance policy on the market is to throw money away. The odds of getting paid a monthly benefit under a cheap contract may be significantly lower than receiving benefits from a quality contract.
LONG TERM CARE INSURANCE
A policy that provides nursing-home care, home-health care, personal or adult day care usually for individuals above the age of 65 or with a chronic or disabling condition that needs constant supervision. Long Term Care Insurance helps protect your assets and savings and preserves your personal freedom to choose where and how you receive services.
A comprehensive policy will cover home health care, adult day care, assisted living and nursing home care.
MEDICARE INSURANCE
A federal insurance program that offers a wide range of benefits to providers and suppliers participating in the program. Providers, in Medicare, are patient care institutions such as hospitals, hospices, nursing homes, and home health agencies. Benefits are payable for most people over age 65, Social Security beneficiaries under 65 entitled to disability benefits
United Financial Services will guide clients to the most suitable type of Medicare and Prescription Coverage.
LIFE INSURANCE
For most people, the purpose of life insurance should be to replace the financial contribution made by a family member.
Life insurance can be pure insurance, which pays only on the death of the insured, or cash value insurance, which also has a savings vehicle. Most people who need life insurance are better off with pure insurance and saving for retirement through other vehicles.
Proceeds from life insurance cover three types of expenses: replacement of the policyholder's income or work, estate taxes, and burial costs. When you consider the amount of insurance to buy, consider the following:
- Generally, life insurance should be allocated proportionally on family members whose salary is important to the family budget.
- Consider a relatively small life insurance policy on a stay-at-home parent to cover childcare and other expenses.
- Don't buy life insurance on children. Instead, buy life insurance on other family members for the benefit of children.
- Consider reducing the amount of life insurance you have as you build more financial assets.
- Pass on credit life insurance and mortgage life insurance if you can. These plans are restrictive and expensive. Buy more general life insurance instead if you feel a need.
- Pass on life insurance altogether if you are single and don't have anyone depending on you. At most, get a small policy to spare your family burial expenses.
You should buy about 12 times the amount of money you would need annually to replace what the family member is contributing. For example, if you would need $40,000 a year to replace the death of an employed member, you would need a $480,000 (rounded to $500,000) policy.
Types of Insurance
- TERM LIFE INSURANCE
A temporary life insurance policy that is in place for a specified number of years. It is a life coverage policy only which provides a level benefit for a level premium – pay the premium … get covered for the term. Term life provides a death benefit only; it does not accumulate cash value. It is often used to cover a particular need, such as the increased need for life insurance during the child-rearing years.
Many term life insurance policies offer the flexibility of being renewed and/or converted:
- They can be renewed for another term without a medical exam.
- They can be converted into a permanent cash equivalent policy from the same carrier.
- WHOLE LIFE
Whole life insurance is a permanent policy that combines a term policy with an investment component. The investment could be in bonds and money-market instruments or stocks. The policy builds cash value that is tax-deferred and that you can borrow against. The three most common types of whole life insurance are traditional whole life policies, universal and variable. With both whole life and term, you can lock in the same monthly payment over the life of the policy.
- UNIVERSAL LIFE
Universal Life is a flexible premium permanent policy. It is a hybrid of term insurance and has a savings element like whole life. As long as the cash value supports the internal expenses of the policy, the policy remains in force. There are no contractually scheduled payments, so it provides flexibility as to how the payments are made.
- VARIABLE LIFE
Variable Life is a permanent policy that allows you to allocate a portion of your premium dollars in a separate investment account comprised of various investments, such as stocks, bonds and money markets. This enables you to invest in the market and not be taxed until the policy is surrendered.
Poor performance means less money is available to pay internal expense, so more premium may be needed to keep the policy in force.
LIABILITY INSURANCE
Insurance that offers protection against claims alleging that a property owner's negligence or inappropriate action resulted in bodily injury or property damage to another party.
AUTO INSURANCE
In most states you are required to have auto insurance and you don't want to be without it.
Basically, you buy auto insurance for two purposes: to insure against liability you have to others and to insure against damage that others do to you or your car.
You need to have liability insurance. How much you need depends on how much you have in assets.
Whether you need insurance to protect your own car depends on your car and how detesting it would be to replace it.
If your car is expensive and if buying another one would wipe you out financially, consider buying comprehensive and collision. If you have an older car and wouldn't get much from the insurance company if it were totaled, don't bother. Instead, put the money you would have paid for comprehensive and collision toward saving for your next car.
HOMEOWNERS' INSURANCE
The purpose of homeowners' insurance is to protect you against damage to your home and property from natural disasters.
Insurance companies offer different ratings of insurance and assign these ratings with codes starting with the letters "HO". While these ratings are fairly standard, they do vary a little with companies, so check with the company to see what policies cover.
When comparing policies, consider differences among deductible, coverage of property other than the house (sheds, garages, etc.), and percent of loss covered. Consider also whether the policy covers resale cost or rebuilding cost. Rebuilding usually provides better coverage, but is more expensive.
Basic homeowner's insurance does not cover the contents, though you can often add it for an additional fee or buy it separately. When buying contents insurance, consider whether it covers replacement value or fair market value. Replacement value is a better buy because it pays to buy a new piece of furniture or appliance, not what your old one is worth.
Consider also buying liability insurance that covers you if someone sustains an injury or other loss on your property.
Renters and condominium owners need only contents and possibly liability insurance. Many companies have policies tailored to these purposes.
APPLIANCE PROTECTION
Don't buy any extended warranties or protection plans when you buy small or major appliances. These plans are pure profit to the appliance stores. That's why the salespeople, push them so hard, especially if they are on commission. They usually cover only periods when very little is likely to go wrong and have numerous exclusions.
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