Insurance Needs Assessment

The transition to adulthood is an exciting new stage that marks true independence. You may have graduated college, taken your first job, and even rented your first apartment. With this new freedom come real responsibilities, including protecting yourself from the financial risks life presents.

Auto

For young insureds, once they are no longer covered on their parent(s) policy, they will need to find insurance coverage in their name. It can be expensive for a young driver, so consider shopping around for the best rates and learn the myriad of ways to manage costs, such as coverage and deductible elections.

Renter’s

If a young adult is moving into an apartment, they should consider renter’s insurance. They may not think they’ve accumulated much in value, but when calculating the cost of replacing a computer, electronic equipment, HD-TV, furniture, clothes, sports equipment, bikes, etc., it can run into thousands of dollars. Renter’s insurance can be inexpensive. When shopping for a policy, ask about whether it includes liability coverage, which can protect one in the event of being sued by someone who is injured in your apartment.

Health

Health-care coverage is frequently obtained through one’s employer. However, if your employer does not offer a health insurance program, there are two choices for obtaining coverage.

The first is to maintain coverage through a parent’s health insurance plan. Federal law permits parents to keep adult children on their plan up to age 26. This choice may be relatively inexpensive, so one may want to ask their parents to inquire what the monthly premium is to add them to their plan.

Another idea is to purchase a policy directly, either through a private insurer, the federal health insurance exchange (HealthCare.gov), or through a state exchange, if available in your state of residence.

While supplemental health coverage, such as AFLAC or cancer policies, may be available, we typically do not recommend them. Instead, establishing an emergency fund with 3-6 months' worth of expenses is a more effective way to hedge against risk. Furthermore, it's essential to evaluate deductibles for all types of insurance. Generally, the purpose of insurance is to hedge against catastrophic loss. Whenever possible, it makes sense to save money to increase your deductible, which can lead to lower premiums.

Disability

Your single most valuable asset is your future earning power. The ability to work and earn an income is essential when it comes to one’s financial survival. Incurring a disability, even for a short period of time, can have substantial economic consequences, making disability insurance one of the most important insurance needs at this stage of life.

Keep in mind that this article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your legal professional before implementing a strategy that includes disability insurance.

Life

Since a young, single adult typically does not have other people depending upon his or her ability to earn a living (e.g., children, dependent parents), some believe the need for life insurance is minimal.

However, due to a long-life expectancy at this young age, life insurance coverage can be very inexpensive. One may want to consider obtaining some coverage to take advantage of low rates and good health in advance of a time when they will have dependents.

Several factors will affect the cost and availability of life insurance, including age, health and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. Consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

Extended Care

Given limited financial resources, extended care insurance may be a low priority. Nevertheless, one may want to have a conversation with their parents about how extended-care insurance may help protect their financial security in retirement.

Marriage changes everything, including insurance needs. Newly married couples should consider a comprehensive review of their current individual insurance coverage to determine if any changes are in order, as well as consider new insurance coverage appropriate to their new life stage.

The good news is that married drivers may be eligible for lower rates than single drivers. Since most couples come into their marriage with two separate auto policies, it is advised to review the existing policies and contact their respective insurance companies to obtain competitive quotes on a new combined policy.

Newly married couples may start out as renters, but they often look to own a home or condo as a first step in building a life together. The purchase of homeowners insurance or condo insurance may be required by the lender. While these policies have important differences, they do share the same purpose — to protect your home, your personal property, and your assets against any personal liability.

As you embark on this new journey, it’s also important to consider coverage for various items. This includes extensions of homeowners or renters insurance for personal belongings, as well as coverage for shared assets like vehicles, recreational equipment, or home-based businesses.

Take special care of what is covered under the policy, the types of covered perils, and the limits on the amount of covered losses. Pay particular attention to whether the policy insures for replacement costs or actual cash value.

 

Like auto insurance, couples often bring together two separate individual health insurance plans. Newly married couples should review their health insurance plans’ costs and benefits and determine whether placing one spouse under the other spouse’s plan makes sense.

 

While supplemental health coverage, such as AFLAC or cancer policies, may be available, we typically do not recommend them. Instead, establishing an emergency fund with 3-6 months' worth of expenses is a more effective way to hedge against risk. Additionally, evaluate deductibles for all types of insurance, as increasing your deductible can often lead to lower premiums.

 

Married couples typically combine their financial resources and live accordingly. This means that your mortgage or car loan may be tied to the combined earnings of you and your spouse. The loss of one income may make it difficult to continue making payments designed for two incomes. Disability insurance is designed to replace lost income so that you can continue to meet your living expenses. Long-term disability is a good option to hedge this risk. Short-term disability may be an option if you anticipate an absence due to maternity, but we advise a well-funded emergency fund with 3-6 months of expenses for short-term income disruptions.
Keep in mind that this article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your legal professional before implementing a strategy that includes disability insurance.

 

Central to any marriage is a concern about the other’s future well-being. In the event of a spouse’s death, a lifestyle based on two incomes may mean that the debt and cash flow obligations can’t be met by the surviving spouse’s single income. Saddling the surviving spouse with a financial burden can be avoided through the purchase of life insurance in an amount that pays off debts and/or replaces the deceased spouse’s income.

 

Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. We generally see term insurance being the most appropriate for this stage of life. It is very affordable. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. Consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

 

Personal liability risks can have a significant impact on the wealth you are beginning to build for your future together. Consider purchasing umbrella insurance under your homeowners’ policy to help protect against the financial risk of personal liability.

 

Extended care insurance may be a low priority given other financial demands, such as saving for retirement. Nevertheless, young adults may want to have a conversation with their parents about how an extended care program may play a role in their retirement financial strategy.

A growing family, by definition, means growing financial obligations—both present and in the future. Raising children can increase insurance needs and heightens the urgency for being properly prepared.

When a child becomes a new driver, parents have the option to add the teenager to their auto insurance policy. It’s advisable for parents to discuss with their insurance provider ways to minimize the additional premium that comes with adding a new driver. Discounts such as Good Student, Driver’s Ed, and driving monitor programs may be available from the insurance company to help reduce costs.

 

It is advised to periodically review your homeowner’s policy for three primary reasons.

 

In this phase, it’s crucial to consider coverage for various items, including extensions of homeowners insurance for toys, sports gear, and other personal belongings. Coverage for recreational vehicles or home-based businesses may also be relevant. Moreover, household income tends to rise during this time, which means that jewelry, art, and other valuables may be among the growing personal assets.
The second reason is that the costs of rebuilding—and debris removal—may have risen over time, necessitating an increase in insurance coverage.

 

Lastly, with growing wealth, couples may want to raise liability coverage, or if they do not have an umbrella policy, consider adding it now. Umbrella insurance is designed to help protect against the financial risk of personal liability.

 

First-time parents will want to be sure to change their health care coverage to a family plan. If a couple has retained separate plans, they may want to evaluate which plan has a better cost-benefit profile. Think about whether now is the appropriate time to consolidate coverage into one plan.

 

While supplemental health coverage, such as AFLAC or cancer policies, may be available, we typically do not recommend them. Instead, establishing an emergency fund with 3-6 months' worth of expenses is a more effective way to hedge against risk. Furthermore, evaluating deductibles for all types of insurance is essential, as a higher deductible can result in lower premiums.

 

If a family is likely to suffer economically because of the loss of one spouse’s income, then disability insurance serves an important role in replacing income that may allow them to meet living expenses without depleting savings.

 

The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.

 

If one already has disability insurance, consider increasing the income replacement benefit since one’s income and standard of living may now be higher than when the policy was originally bought.

 

With children, the amount of future financial obligations increases. The cost of raising children and funding their college education can be expensive. Should one of the spouses die, the loss of income might severely limit the future quality of life for the surviving children and spouse. Not only does death eliminate the future income of one spouse permanently, but the future earning power of the surviving spouse might be diminished as single parenthood may necessitate fewer working hours and turning down promotions.

The amount of life insurance coverage needed to fund this potential financial loss is predicated on, among other factors, lifestyle, debts, age and number of children, and anticipated future college expenses.

Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. We generally see term insurance being the most appropriate for this stage of life. It is very affordable. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. Consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

Some couples decide to have one parent stay at home to care for the children full time. The economic value of the stay-at-home parent is frequently overlooked. Should the stay-at-home parent die, the surviving parent would likely need to pay for a range of household and child-care services and potentially suffer the loss of future income due to the demands of single parenthood.

The earlier you consider extended-care choices the better. However, the financial demands of more immediate priorities, like saving for your children’s college education or your retirement, will take precedence if resources are limited.

With the children now out of the house, financial priorities become more focused on preparing for retirement. At this stage, one may very likely be at the height of their earning power and fast approaching peak savings as they lay the groundwork for retirement. During this final leg to retirement—and throughout one’s retirement period—wealth protection is critical.
The preservation of one’s assets may not be solely a function of their investment strategy but may include a comprehensive insurance approach to protect them against an array of financial risks, most especially health care.

In addition to wealth protection, one can also now be seriously contemplating a number of important estate and legacy objectives.

Even though the mortgage may be paid off—and thus released of the lender’s requirement to have homeowners’ insurance—it remains important to consider coverage against property loss and exposure to personal liability. Now is an ideal time to review the policy as the cost of replacing the home and the belongings contained therein may have grown over the years.

As you transition into this stage of life, it's important to consider coverage for various items, including extensions of homeowners insurance for valuable collectibles, recreational vehicles, or home-based businesses.

Also, consider an umbrella policy, which is designed to help protect against the financial risk of personal liability.

There are several key health insurance issues facing empty nesters and retirees.

If you retire prior to age 65 when Medicare coverage is set to begin, the retiree will need coverage to bridge the gap between when they retire and when they turn 65. If their spouse continues to work, they may want to consider getting themselves added to his or her plan, though they may need to wait until the employer’s annual enrollment period.

Alternatively, they may also purchase coverage through a private insurer or through HealthCare.gov (or your state’s program, if available).

Once enrolled in Medicare, one should consider purchasing Part D of Medicare, the Medicare Prescription Drug Plan, which can help save money on prescriptions. 

Additionally, one may want to consider other Medigap insurance, which is designed to pay for medical care not covered by Medicare. Medigap plans are bought through private insurance companies and best purchased within three (3) months of turning age 65 in an effort to get the best price and the most choices.

This coverage may continue until one retires. When one stops working, they should consider canceling their disability insurance as the need for it has expired.

The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.

The financial obligations that drove an empty nesters or retiree’s life insurance needs while they were raising a family may have evaporated. However, they may find new needs arising from estate issues, such as liquidity, creating a legacy, etc.

Several factors will affect the cost and availability of life insurance, including age, health and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. Consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

For some, extended care insurance is a priority in this stage of life. With the expense of children in the rearview mirror, you can now turn your focus to buying protection against potentially the most significant health-care expense you are likely to face in retirement.
Designed to pay for chronic, long-lasting illnesses and regular care, whether in-home or at a nursing home, extended care insurance coverage is critically important since most of these costs are not covered by Medicare.