Ensuring Peace of Mind

The arrival of a new baby reminds us of the fragility of life 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 event of illness, accident or death. Insurance protects you and your family from financially destructive events. Instead of your having to save for all the possible events that could hurt you financially, your insurance company covers those events for the cost of your premiums. For example, you can save $1,000,000 of your own money — or you can buy a $1,000,000 umbrella liability policy for approximately $400 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 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 now, assuming you already have auto and homeowners insurance.

Health Insurance
The first order of business after your baby’s birth is contacting your health insurance provider to 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 for 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.

The healthcare situation in Washington has many Americans asking questions about the features and costs of their coverage. Insurance is a must to protect your physical and financial health, but also to avoid tax penalties under the Affordable Care Act (ACA). Many families secure health insurance through their employers, their state marketplace for ACA plans, or Medicaid.

While shopping for insurance, compare the types of coverage available and the costs. Make sure you understand key insurance terms and basic principles. For example, a health plan with a higher deductible could mean a lower monthly premium, but you might pay more out of pocket when you use your insurance. 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 your family’s health and well-being.

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 can 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’re not earning wages, 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 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 or 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 Policies
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 or can work only in a lower paid profession that doesn’t cover your living expenses. It’s important to review disability insurance policies best suited to your income-earning situation, rather than to choose the least expensive.

For more information on making sure that you have adequate insurance coverage, visit www.smartaboutmoney.org.