Every Penny Counts: Understanding Insurance
When you’re losing money in the stock market and your 401k is looking more like a 201k, don’t be discouraged. Use this as an opportunity to make sure the rest of your financial plan is strong and stable. When you think about managing your money and stretching the value of your dollar, you need to look beyond just investing and what’s in your retirement accounts. Realize that financial planning is a comprehensive process, which means the stock market is just one piece of the puzzle. When the market is experiencing sharp losses like it is today you need to make sure the rest of your plan is in perfect shape.
It’s during difficult times like these that a traffic accident, a house fire or a medical crisis could devastate your financial plan if you’re not careful. That’s why it’s important today, more than ever before, to make sure your insurance coverage is adequate. There are three lines of insurance you need to have (at a minimum) to protect yourself and those are auto, renter’s/homeowner’s and health insurance. Fortunately, there are money saving strategies you can use for all three types if you know where to look and what questions to ask.
Choosing The Right Insurance Company
First, you need to know how to pick the right insurance company. Or if you’ve already chosen a company you need to make sure it’s still able to meet your needs. There are six factors you should consider when evaluating an insurance company and they are:
1. Adequacy of policy limits
2. Cost
3. Potential gaps in coverage
4. Quality of service
5. Carrier’s financial stability
6. Carrier’s claim settlement procedure
Ask your current or potential insurance agent to discuss each of these factors with you as a way to test his ability to work with you. If the agent isn’t willing to answer your questions now, just think how helpful he’ll be when you get in an accident and need to file a claim!
Premiums and Deductibles
Once you’ve select a company you’ll then need to work with your agent to purchase the policy that’s right for you. That means you’ll have to decide what your premium and deductible should be. Each year you’ll have to pay a premium to the insurance company to keep your policy in force. In return for your premium payment, the insurance company promises to cover you in case of an accident or loss. Premiums work alongside deductibles. A deductible is the amount of money you need to pay out-of-pocket if you file a claim before the insurance company will pay you any money. A good deductible to have is $500 for auto and renter’s/homeowner’s insurance. This means that if you file a claim you’ll have to pay the first $500 out-of-pocket and the insurance company will pay the rest. Deductibles can go as low as $100 or even $0, but choosing a low deductible will make your premium payment much higher. Remember, the lower your deductible the higher your premium.
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