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Cents and Sensibility Guy Steele |
Stay current with
insurance needs as
your life changesYou probably don't spend a lot of time pondering insurance. And yet, you should think about it, because, by taking the steps necessary to meet all your key insurance needs, you can help protect your income, your family and your long-term financial goals.
In creating a comprehensive insurance strategy, you need to keep one key point in mind: Your protection needs will evolve over time. Consequently, at different stages of life, you'll need to evaluate your insurance coverage to make sure it's appropriate and sufficient.
When should you first start thinking about insurance? Do you even need to worry about it if you're first starting out in your career, you're single and you have no dependents?
Actually, you might have more to protect than you thought. Do you own a house? Do you have a student loan? A car loan? A balance on your credit cards? If you have any or all of these expenses, then you could face serious problems if something happened to your income. And the fact is that, at every stage of your working life, you are much more likely to become disabled than you are to die. If a serious injury or lengthy illness prevents you from working, how will you make your house, car and other payments?
Disability insurance can help. If your employer offers disability coverage as a low-cost benefit, take it. However, you may have to supplement this coverage with an individual policy.
Now, let's fast-forward a few years in your life cycle. If you get married and have children, you should absolutely consider life insurance. The amount of insurance you require should be based on several factors: your income, your spouse's income, the size of your mortgage, how many children you have, anticipated college costs, etc.
During your early working years, you may be able to get by with relatively inexpensive term insurance. As you move into your middle years, though, you might want to explore some type of "permanent" life insurance.
Once you approach retirement age, you'll also want to consider long-term care insurance. A year's stay in a nursing home can cost $50,000 -- and in some major metropolitan areas, it can cost twice that much, according to the Health Insurance Association of America. Medicare may only pay a fraction of these costs, so if you want to maintain your financial independence and avoid burdening your family, you might want to purchase a long-term care policy.
Finally, during your retirement years, you could use life insurance as an estate-planning tool. An attorney experienced in estate planning can advise you on the potential uses of life insurance in trusts or other arrangements.
As you can see, meeting your insurance needs is a dynamic process. That's why youmay want to periodically review your insurance situation with an investment professional who has the tools and experience to recommend the right moves to make -- at the right time in your life.
See the Columnists section for some past articles.
Guy Steele is a financial planner and head of the Pali Palms office of Edward Jones. Send planning and investing questions to him at 970 N. Kalaheo Ave., Suite C-210, Kailua, Hawaii, 96734, or call 254-0688
