Financial Planning
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Insurance Matters

Choosing the best coverage for your loved ones.

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The arrival of a new baby reminds us of the fragility of our lives and that no one is invincible. When you have a family to support, it’s essential that you have the insurance coverage you need to ensure financial peace of mind in the unexpected event of illness, accident or death.

Insurance protects you and your family from financially destructive events. Instead of having to save to cover all the possible events that could hurt you financially, your insurance company agrees to cover those events for the cost of your premiums. For example, you can save one million dollars of your own money — or you can buy a one-million-dollar umbrella liability policy for approximately four hundred dollars annually.

“It might seem like a waste of money if nothing bad ever happens to you, but you can’t predict when something will happen to you and how much it will cost,” says Patricia Seaman, senior director at the National Endowment for Financial Education. “Insurance preserves family assets and lets you sleep at night knowing you are protected from financial catastrophe.”

As new parents you should review your health, life and disability insurance immediately, assuming you already have auto and homeowners insurance in place.

Health Insurance
The first order of business after your baby is born is to contact your health insurance provider and have your baby added as a covered dependent. If you follow the American Academy of Pediatrics guidelines, you will see your healthcare provider at least seven times in the first year alone for a well-baby checkups.
“And if your baby is illness-or accident-prone — or if you would rather take your baby in even when you’re not sure he is sick enough — you’ll be looking at several more doctor’s visits in the first couple of years,” says Seaman.

As of 2014, most individuals are required to have qualified health insurance coverage or they will have to pay a tax penalty. Many families secure health insurance through their employers, their state marketplace for Affordable Care Act plans or the federal Medicaid program. You should choose a plan that covers routine health needs and provides adequate coverage for emergencies (to prevent the risk of medical bankruptcy). Vision and dental insurance are part of maintaining the health and well-being of your family members.

Life Insurance
Life insurance provides your survivors income to live on, specifically what you currently make from your business or employment that would vanish if you passed away. Online calculators are available to help you determine how much coverage you need by considering your family’s living expenses, including outstanding debts, loans and mortgages, and future expenses such as college. Even if you are not earning income, life insurance can cover the financial cost of your contributions to the household, such as housekeeping, cooking and chauffeuring.

Term life insurance policies pay their face value upon death and remain in effect for a specific period of time that you determine, such as 20 years. Securing term life insurance at a younger age will mean lower costs, particularly if you are in good health. Employers typically offer this type of life insurance policy to their employees, often equal to one to two times your annual salary. Purchase additional insurance privately to supplement this amount if it is too low. Cash-value life insurance (also known as whole life) includes a death benefit and a savings component. You can borrow and withdraw the cash value of a life insurance policy as needed.

Disability Insurance
Disability will affect one in four workers at some point during their careers, according to the U.S. Social Security Administration, which provides disability benefits to qualified recipients. Disability insurance also protects income, specifically what is lost if you can’t work at all or if you only can work in a lower paid profession that doesn’t cover your living expenses. It is important to review disability insurance policies best-suited for your income-earning situation, rather than choose the least expensive.

For more tips on making sure you are adequately covered with insurance, visit www.smartaboutmoney.org.

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Written by National Endowment for Financial Education (NEFE)

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