June 28th is National Insurance Awareness Day, the perfect time to go over your plan and see if you need to make any adjustments. Chartered Financial Consultant John Caserta, managing partner at Penn Mutual’s Caserta & de Jongh, has some guidelines to consider.
Major types of insurances that people should consider having
* The purpose of insurance is transfer the risk of a loss (specifically a substantial loss) to an insurance company for a premium payment.
* While many insurances are offered as employer-sponsored benefits, they are limited and need to be supplemented with individual insurance policies.
– Home/Renters and Auto Insurance
– Liability/Personal Umbrella
– Disability Insurance
– Health Insurance
– Life Insurance
What to consider when purchasing insurance
* What is covered and what is not covered by your insurance policy?
* What is the claims-paying history of the company? If you’re paying for coverage and have a legitimate claim that is covered under your policy you will want to make sure that you get paid in a timely manner.
* What is the financial strength of the company? Using a credit rating, Comdex rating, or asking about company financials will help you understand if the company is in a position to keep its promise to pay in the event of a covered loss.
* Is there a deductible and if so how much is it? Some insurance policies require the insured to pay a certain amount of the loss before a benefit is paid. And that deductible could also be in the form of “time” in which an insured would have to wait to receive a benefit.
* What is the cost of the policy in light of its benefits? Cost alone should not determine which policy to choose.
Why insurance is not gambling
* There is a misconception
* Gambling is speculative and offers the potential for gain while insurance addresses a pure risk and is meant to restore the person that is insured to their original position.
Important steps in an insurance review
* How has life changed? Maybe you have acquired more “stuff” or your income has increased. The level of coverage should keep pace with changes in your personal finances.
* Take inventory. Create a list of current insurance policies including the name of the insurance company, policy number, and type of insurance. Locate the current policies and if you’ve lost them, ask for replacements (but beware that replacements typically have a cost).
