Episode 9: Certified Financial Planner Jeb Jarrell discusses various types of insurance for young professionals. We briefly touched on how insurance plays a role in a comprehensive financial plan, in Episode 3. Today, he focuses on protecting your family.
No one wants to think about what could happen in the event of a medical emergency or a car wreck, but it’s an unfortunate reality. Having a plan in place is an important step in protecting you, your family and your assets.
This is the first policy you need to have in place. It’ll provide money for your family to live on, should something happen to you (especially in your younger years). Jeb recommends selecting a term life insurance policy, instead of a whole life policy. It’s more cost-effective and provides various options for both the amount and the coverage period. Match your term to when you plan to be financially independent.
It’s important to evaluate your current needs, as you head into an open enrollment period. Your personal situation and/or your family’s needs may have changed during the previous year. It would be a good idea to review all available plans to see if you need to change coverages, add coverages, etc.
For a professional, this is an important area of insurance coverage. You need to have a long-term coverage that extends to your retirement age. Not all policies are written the same, so check the specific language contained therein. The definition of disability can also be different from company to company. Jeb recommends a policy that provides for “own occupation” coverage. This kicks in if you can no longer perform your own job, regardless of whether you can still work at any occupation.
You’ll also want to identify how much of your current income would be covered by this policy. A future purchase option rider is important. This enables you to increase the amount of benefits to be paid, as your income continues to grow.
Jeb posted an article on disability insurance on his blog.
An umbrella policy protects you in the event someone sues you for an about beyond the policy limits of your existing home and auto insurance policies. As a rule of thumb, consider having an umbrella policy that matches your level of assets. This type of policy can be extremely inexpensive to add to your existing coverage.
Property and Casualty Insurance
Just like health insurance, you’ll want to review your current needs before simply renewing a policy. Your situation could have changed or you may be anticipating a change occurring during the upcoming policy year.
Jeb is a strong advocate for carrying well above the state minimum required coverage on your automobile insurance policy. The state minimum for coverage in Kentucky is only $25,000.
Home values have increased, significantly. Remember to reconsider your homeowner’s policy to accommodate for the increased replacement value. Don’t find yourself “under-covered” should something happen to your home.
Insurance is a vital part of a comprehensive financial plan. It provides an important safety net for a young family. Take time to evaluate your needs and make sure you have the proper types and amounts of coverage in place.
At the end of the day, you should sit down with a qualified, investment advisor who can help you to think through your investment strategies. A good advisor will bring a solid perspective, but also know how to develop and implement your strategy.
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