Kids, no kids, empty-nesters, boomerangs, blended, traditional, same-sex . . . today's households vary in complicated ways. All families deal with questions about insurance. As your family changes, be sure to keep current with your coverage and the considerations you face together.
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Auto Insurance Considerations for Modern Families
Having a child, of course, affects all of your insurance considerations. But focusing on the family car, here are some special concerns.
At this stage of your life, you begin to interact with other parents, perhaps driving their children in your car while carpooling. To protect yourself, you might want to consider increasing your liability insurance in case of an accident.
During this time you will likely be accumulating more assets, and therefore you might want to consider purchasing an umbrella policy that will better protect your financial resources in case of a law suit stemming from a car accident or an accident occurring in your home.
As your family grows, you might be thinking about purchasing a bigger car to fit additional family members. Since auto insurance premiums are linked to the type of vehicle driven, check the insurance rates before you make your final choice of a car. SUVs, convertibles and performance vehicles typically cost more to insure than some other vehicles.
And finally, if you haven’t yet merged policies held by separate spouses, now’s a good time to do it to control costs, as consolidation will potentially offer you a decreased rate in your premiums or enable you to acquire more insurance at the same level of spending.
As your cute little kids become teenage drivers, competing with you for the car. In addition – as you enter that mid-life period – your own automotive interests may steer you towards different types of cars than you’ve previously driven.
- When adding your teenage driver to your policy, be prepared to pay higher auto insurance rates. Although some states do not allow gender differences in auto rates, industry figures show that a teenage female driver can cause rates to increase as much as 50 percent, while a young male driver can boost costs by up to 100 percent.
- If you plan to provide your child with an automobile to take to college, check on the need for a separate auto insurance policy.
- At this stage of your life, you may be frantically transporting your kids – and their friends – to sports practices and other after-school activities. Given these chauffeuring responsibilities, you might want to consider increasing your liability insurance in case of an accident.
- Hopefully, your success in the job market is causing your net worth to grow. So you may want to consider purchasing an “umbrella policy” to raise your auto liability coverage, for example to $1 million, in order to protect your assets.
Here are some tips to prudently control your auto insurance costs:
- Ask about an “accident forgiveness” clause that promises not to raise premiums if a student gets into one minor accident. In addition, consider raising the policy’s deductible and only allowing their child to drive the family’s oldest, least expensive car. In addition, parents might consider purchasing an older car for their child and foregoing comprehensive and collision insurance on that vehicle.
- When you add a teen driver to your policy, it’s a good time to evaluate different auto insurance companies and compare costs, as firms differ in their policies for young drivers.
- If you’re planning to purchase a car for your young driver, keep in mind that auto insurance premiums are linked to the type of vehicle driven. If you’re buying or leasing a new car, check the insurance rates before you make your final choice. SUVs, convertibles and performance vehicles typically cost more to insure than some cars.
- Parents of new teenage drivers should encourage their children to maintain good grades and to take a driver’s education class, as these steps may help lower your insurance rates.
- You might also consider raising the deductible for your comprehensive and collision coverage. A higher deductible will lower your premium cost.
- In addition, keep in mind that if your child lives away at school (at least 100 miles) and has less access to the insured vehicle, you may be able to take advantage of insurance discounts.
- Remember that companies often grant discounts to those who are considered “safe drivers,” so try to keep your driving record – and your children’s driving record – free from accidents and moving violations for at least three years, or consider taking a defensive driving course.
- College Students and Auto Insurance: Parents and college students should do some homework regarding auto insurance. If a college student is going to be using the family vehicle when visiting home, parents should make sure the child is listed by name on the family’s auto insurance policy. If the student will be taking a car with them to school, parents should check the specific rates for the college’s city and state before deciding whether to keep their child on the family’s auto policy. In addition, the insurance company should be notified each semester if the student maintains good grades, as that accomplishment might lower premiums.
Home Insurance Considerations for Modern Families
Young families often take the big plunge into home ownership – a step that instantly requires you to get smart about home insurance.
- If you are purchasing your first home, or reviewing a new homeowners policy, remember that you only need to insure the home itself and your possessions – not the land your house sits on. Thus, you should expect that the insured value of your home will be less than the market value.
- Growing families often find that their starter home needs improvement. Be sure to alert your insurance company when making any major home improvements – usually anything over $5,000 – as you will want to update your homeowners insurance policy to reflect the new enhancement and prevent being underinsured.
- In maintaining your residence you must realize that you are liable for things that happen on your premises. Keep in mind that in many states you could be held legally responsible for the actions of anyone who drinks in your home and then has an accident in your house or after leaving it. Your policy should protect you against lawsuits due to these types of liability issues.
- Also as you install backyard items for your active kids – swing set, trampoline or swimming pool – inform your insurance company. These items may require you to increase your liability coverage through an umbrella policy that protects you in the event that someone is injured while on your property.
- As you acquire more valuables – jewelry, family heirlooms, antiques, art – you might want to consider purchasing an additional “floater” or “rider” to your homeowners policy to cover these special items. They're typically not covered by a basic homeowners or renter's policy.
- Finally, we all know that raising kids can be tough on your budget. One way to keep your yearly premium costs down is to consider increasing your homeowners deductible. Bear in mind that raising your deductible increases the out-of-pocket costs you will have to pay in the event of theft or damage to your home.
Your home will likely be your biggest asset – as well as a big part of your budget. As your family grows, you may move to a larger house, build an addition or replace that child-stained sofa and inexpensive wall decorations with pricier furnishings and artwork.
- Remember to add home insurance coverage as you enhance the value of your home and acquire expensive possessions like furniture, computers, stereos and television sets.
- You should alert your insurance company when making any major home improvement – usually anything over $5,000. You will want to update your homeowners insurance policy to reflect the new enhancement and prevent being underinsured.
- In maintaining your residence, you must realize that you are liable for things that happen on your premises. Keep in mind that in many states you could be held legally responsible for the actions of anyone who drinks in your home and then has an accident in your house or after leaving it. Your policy should protect you against lawsuits due to these types of liability issues.
- Remember that backyard items, such as a trampoline or pool, may require you to increase your liability coverage through an umbrella policy that protects you in the event that someone is injured while on your property.
- As you acquire more valuables – jewelry, family heirlooms, antiques, art – you might want to consider purchasing an additional “floater” or “rider” to your policy to cover these special items. They’re typically not covered by a basic homeowners or renter’s policy.
- If you have a child about to go away to college who will be living in a dorm or apartment, be sure to check your homeowners policy to see if their possessions will be covered. In many – if not most – cases, they will not be covered under your policy, and you may want to consider purchasing separate coverage.
- Most important, know what’s not covered by your policy. For example, a break in the water or septic line outside your home will typically not be covered by your homeowners policy but can be a financial drain to repair. Specialized policies may be available to cover these situations; for example, from your water or septic company.
- College Students and Renter’s Insurance: Whether students live in college housing or rent apartments, they will likely have valuables — such as a computer, TV, stereo and/or video game system — that could be stolen or destroyed in a fire or natural disaster. Parents should check their homeowners policy to see whether it will cover a college student’s possessions. Furthermore, if students live in an off-campus apartment, parents should consider purchasing renter’s insurance through their existing homeowners insurance provider.
Health Insurance Considerations for Modern Families
If both parents are working full-time jobs, it is recommended that you compare these health insurance policies to see which best fits the needs of your family:
- Employee and Spouse
- Employee and Family
- Employee + one, where the spouse has separate coverage
Make sure to review the co-pay amounts and different options carefully to see exactly what is covered – and what isn't – for both parents and children.
- Check to see if your employer offers a flexible spending account. These plans, which allow you to set aside pretax dollars for medical expenses and childcare, are a good way to reduce your out-of-pocket medical costs.
- When expecting a child, review the coverage options available to you, and find out exactly how your healthcare plan handles the costs. Remember to consider the costs of prenatal vitamins, prenatal and neo-natal screenings and tests, emergency procedures, delivery – C-section and traditional – and pediatric care.
- Also, make sure you are aware of the deadline to register your newborn with your health insurance company. Consult with your employer and health insurance provider regarding the requirements before your child is born. If you decide to adopt a child, consult with your employer and health insurance provider regarding the requirements for obtaining health insurance coverage in advance, and also check with your state health department.
As your family matures, its health needs change. So, when your annual enrollment date approaches for employer-provided health insurance, recognize that you may want to alter elections or eliminate certain types of coverage, if you have the choice.
- For example, if you and your spouse have decided not to have more children, you may not be interested in a policy that covers pregnancy-related services. But note that if you decline pregnancy-related coverage and your teenage daughter becomes pregnant, she will not be covered. If you still have young children, consider a program with a preventative care option that provides shots and “well visits.”
- College Students and Health Insurance. Full-time college students are often covered under their parents’ health insurance plans until they graduate or reach 23 years of age. While students are away at college, it is important to check whether the campus health facility, local physicians and hospitals accept the family’s insurance coverage. If not, it might be advisable to purchase a student insurance plan through the college. Be sure the student has a copy of the relevant insurance cards.
- Keep in mind that health insurance policies will most likely not cover some common childhood procedures and problems, such as allergy tests, braces and replacements for lost eyeglasses, contacts or retainers. Consider contributing money to a flexible spending plan, if your employer offers one, to help you put aside pretax money to cover these types of expenses.
- Know your rights and entitlements under COBRA – the Consolidated Omnibus Budget Reconciliation Act. If you lose or change your job or decide to start your own business, be sure to familiarize yourself with COBRA so that you’re clear how your family will be covered when your situation changes.
- If you’re over 50, you may want to consider whether long-term care insurance make sense for you. Before purchasing long-term care insurance, do a thorough analysis of your financial situation to be sure you can continue to afford the premiums for an extended period of years – through your old age until death – and figure out whether you have significant savings or other financial assets you want to protect. Many people find they cannot afford the premiums as they get older and get closer to the point when they are most likely to need the coverage. In addition, make sure you know what triggers will result in benefit payments, as well as the likelihood and potential size of premium increases.
Most people are not prepared to deal with the possibility of becoming disabled and therefore unable to work. However, statistics from the U.S. Census Bureau indicate that in 2000 a substantial portion of the nation's population — nearly 20 percent — had some type of long-lasting condition or disability.
Being knowledgeable about disability insurance options before an accident or serious illness occurs can help ease the financial pain for you and your family.
For insurance purposes, disability is typically defined as the inability to work due to an illness or injury. The exact definition of disability varies markedly among different insurance companies and policy descriptions.
There are two main types of disability insurance: short-term and long-term.
Short-Term Disability Insurance
Some states require employers to carry short-term disability insurance for their employees. This type of coverage replaces a portion of the policyholder's salary for a short-period --typically from three to six months following a disability. The specific time period and percentage of replaced income varies with different policies.
Long-Term Disability Insurance
Long-term disability insurance coverage typically begins after the policyholder is disabled and unable to work for at least six months. It can extend for a specified number of years or until the insured retires or reaches the age of 65, depending on the policy selected. Though policies can be costly, being disabled for a long period of time can be financially devastating.
According to research by the U.S. Department of Education and the National Institute on Disability and Rehabilitation, the most common causes of long-term disability are heart disease, back injuries, and cancer, followed by anxiety and depression.
Consumers should not confuse disability insurance with workers' compensation – a benefit that employers are required to carry in most states for employees who are injured on the job.
The NAIC offers the following tips to consumers considering disability insurance:
- Determine how much money you'll need to cover all your critical expenses. Consider all your main monthly costs - mortgage payments/rent, food, utilities and transportation – and figure you will have additional medical costs tacked on due to your disability. Unless your investments and savings can maintain your current lifestyle for several years, you may want to consider purchasing long-term disability insurance, which typically covers about 60 percent of your previous income (percentages vary per policy/company). Also, you'll need to decide how long you want benefits to last.
- Be aware that having a pre-existing health condition, such as a back problem or heart ailment, coupled with your age, could affect whether you'll qualify for long-term disability insurance and at what cost. You may be subject to a higher premium or be “excluded” completely from purchasing a policy based on your medical history.
- Typically, younger, healthier individuals pay lower disability premiums. If you purchase disability insurance at a young age and can get a “non-cancelable” policy, your coverage can't be cancelled and premiums can't be raised once your medical exam has been approved and your policy issued, assuming your premiums are paid on time.
- While a “guaranteed renewable” policy can't be cancelled, its premiums may be increased on the anniversary of the policy or when stated in the policy.
- Most long-term disability insurance stipulates a waiting period, such as 90 days, 180 days or one year before benefits are paid. The longer waiting period you select, the lower the premium.
- If you have disability insurance and become disabled, you'll need to fill out a claim form. Keep in mind that many insurance companies will require supporting documentation from physicians to verify whether and to what extent you are disabled, before paying out on a claim.
- Find out if your employer offers a group short-term and/or long-term disability plan. Typically, premiums from group plans are less expensive than individual policies. Also explore whether you can convert group disability coverage from your previous employer to an individual policy should you change jobs.
The federal government does offer long-term disability benefits through the Social Security Administration (SSA) under the following circumstances: “…if you cannot do work that you did before and we decide that you cannot adjust to other work because of your medical condition(s). Your disability must also last or be expected to last for at least one year or to result in death.”
Life Insurance Considerations for Modern Families
Having children is often the 'catalyst' for buying life insurance, as young parents recognize the awesome, life-long responsibility they have assumed.
- When purchasing life insurance, consider covering both spouses – even if one stays at home and is not employed. In the event of the stay-at-home parent's death, the surviving spouse will need to shoulder all the responsibilities of the household.
- In determining the amount of life insurance to purchase, make sure to take into account your full childcare costs – especially for children under 5 years old and for kids with special needs. Take the time to estimate these costs carefully, and factor them into your decision-making process.
- Weigh the costs/benefits of purchasing whole life vs. term life insurance as part of your financial planning strategy. Whole life insurance policies build cash value and also pay a death benefit. But they are more expensive. If you can't afford whole life insurance right now, but think you may want it in the future, you may want to consider term life insurance with a conversion option that will let you change to a whole life policy for a fee when you are ready.
- Or you may want to purchase term life insurance, which offers death benefit protection for a specified time period. For example, term life insurance may be appropriate to provide coverage during your child-rearing years or while paying off a mortgage. Term life premiums increase as you age. Term life is typically less expensive in your younger years than permanent life insurance, which covers you for your entire life and typically has level premiums. You may also want to consider purchasing a combination of term life insurance and whole life insurance.
- Remember to update your policy to include your children as beneficiaries, especially in the event of a divorce. You might want to consider naming a trustee for your children in the unfortunate event that both parents die before the children turn 18.
- Some people purchase life insurance for healthy newborn babies because their insurability is high and the premium costs are low. If health issues develop later in life, individuals may not be eligible for life insurance coverage.
Here are some tips to prudently control life insurance costs:
- Many life insurance plans offer discounts for improved health (quitting smoking, lowering cholesterol, etc), so make sure to inquire about these potential benefits.
- If you are in the military, consider Serviceman's Group Life Insurance (SGLI) – a program of low cost group term life insurance automatically available to all military members. This policy is automatically activated unless the service member opts out.
- If you have decided to purchase additional life insurance outside of the SGLI, review the list of exclusions to the policies, and make sure that the benefits will be payable even if the death is a result of war, the action of a military force or traveling on a non-commercial aircraft.
- Individuals who sell life insurance at military installations are required to obtain authorization from the Department of Defense, so ask to see the agent's permit or license.
- Finally, remember the impact of key factors that can affect your life insurance premiums. These include:
- Pre-existing and/or chronic health problems, such as diabetes, heart disease or cancer
- Poor health habits, such as smoking and excessive drinking
- Your driving record
- Engaging in dangerous hobbies, such as skydiving, skiing or rock climbing
As families grow and life gets complicated, they often begin to ignore their policies. It is important to periodically review and update your coverage to reflect changes in your financial situation and family composition.
- One strategy to keep costs down for a growing family may be to take a look at term life insurance, which offers financial protection for a specified time period. For example, term life insurance is often appropriate to provide coverage during your child-rearing years or while paying off a mortgage. You may want to consider this cost-effective way to protect your family while still putting money into other investments.
- Consider the future costs of your child’s college education when determining how much life insurance you need at this life stage, and remember that permanent life insurance can help to complete a college savings program that is not fully funded. Another option you may want to consider is purchasing a combination of term life insurance and whole life insurance.
- If you are considering purchasing an annuity – a contract with an insurance company that promises to pay a series of income payments at regular intervals in return for premiums you have paid – explore the different types of options available:
- If you are in the military, consider Serviceman’s Group Life Insurance (SGLI) - a program of low-cost group term life insurance automatically available to all military members. This policy is automatically activated unless the service member opts out. If you have decided to purchase additional life insurance outside of the SGLI, review the list of exclusions to the policies, and make sure that the benefits will be payable even if the death is a result of war, the action of a military force or traveling on a non-commercial aircraft.
- Single premium
- Multiple premium
In addition, make sure you examine whether an annuity makes sense for you in terms of your income needs. Ask whether the annuity lets you tap into your principal if you should need it, or whether there are stiff penalty fees. Be sure you understand the fees associated with the annuity, as well as the special tax treatment of annuities, namely that income tax on annuities is deferred until you start receiving the income payments.
Marriage equality can raise new financial questions for same-sex couples and domestic partners.
The proportion of U.S. same-sex cohabiting couples getting married increased from 38 to 49 percent since the Supreme Court ruling legalized such unions nationwide, according to Gallup research. However, new research from the NAIC suggests many couples may be sidestepping some important insurance questions on the way to the altar. Not getting smart about insurance before tying the knot could be costly. The new ruling also may require domestic partners not contemplating marriage to revisit current coverage.
In an online survey, the NAIC asked recently or soon-to-be married LGBTQ individuals to share their views about financial factors they consider important to address before marriage.
- Eighty two percent said they discussed or planned to discuss health insurance before walking down the aisle. Life insurance and taxes tied for the second most likely pre-marriage financial topics at 70 percent.
- Women in same-sex relationships are significantly more likely than men to discuss life insurance pre-marriage (74 vs. 61 percent).
- By contrast, less than one-quarter of respondents inquired or planned to inquire about their partner's driving record before saying "I do."
- When asked to prioritize, nearly one-third identified health insurance as the "single greatest financial consideration" when getting married.
- Twenty-five percent view the impact of commingling assets as their single greatest pre-marriage financial consideration.
- Married respondents who earn between $50,000 and $75,000 per year are more likely to cite taxes as the single greatest financial consideration before marriage (34 percent) than married respondents who make less than $25,000 (16 percent) or those making more than $75,000 (18 percent).
The NAIC encourages LGBTQ individuals in a committed relationship, newly married same-sex couples and domestic partners to educate themselves about the impact of the Supreme Court's marriage equality ruling on all insurance types: health, life, auto and home.
Note that while marriage equality ensures legally-married same-sex couples have access to insurance options equivalent to heterosexual married couples, state and local laws continue to govern most issues regarding the recognition, rights, benefits and privileges associated with domestic partnerships. Contact your state insurance commissioner for more tips to help same-sex couples and domestic partners make the right insurance decisions, including information specific to where you live. And find out more about how life events such as getting married or becoming a new parent can affect insurance needs.
Auto Insurance Considerations for Domestic Partners and Same-Sex Couples
- Most insurance companies offer multi-car/multi-driver discounts to married couples and domestic partners in long-term, committed relationships. Combining policies might make sense unless your partner has a less than stellar driving record. Check with your auto insurer to see if you're eligible for such offerings, but take the time to ask your partner the tough questions before making any changes.
- If you choose not to marry, and you and your partner either share a car or drive one another's cars, consider listing each other as secondary drivers on both auto insurance policies. Such disclosure will eliminate uncertainty and may prevent a claim being denied in the event of an accident.
- While most insurance companies require nothing more than notification that both legally married spouses plan to drive a rented car, domestic partners may need to pay extra to share driving responsibilities. Check with the car rental company to make sure you understand additional driver rules.
Home Insurance Considerations for Domestic Partners and Same-Sex Couples
- Whether you choose to marry or not, if you and your significant other buy a home together, make sure both names are listed on the deed, mortgage and homeowner's policy.
- If you are not married and living in a home owned by only one partner, consider having the homeowner's policy endorsed to include coverage for the non-homeowner's belongings. This approach may be less expensive than purchasing a separate renter's policy.
Health Insurance Considerations for Domestic Partners and Same-Sex Couples
- Under the Affordable Care Act, all insurance companies must offer the same individual or group health plans to legally-married gay and lesbian couples as those offered to married heterosexual couples. For many employers, this ruling calls into question the need to maintain domestic partner benefits. Such a change may require same-sex couples with no plans to marry to seek other options.
- Federal or state laws do not limit employers or insurance companies from recognizing domestic partners. However, some employers and insurance providers may require formal proof of your relationship and any dependent children. Documentation may include a domestic partnership affidavit, birth certificates or copy of a lease, homeowners' insurance policy or joint financial account statement.
- To make sure your significant other and his or her children are eligible for company-sponsored domestic partner benefits, check with your Human Resources representative to understand exactly how your employer defines key terms such as "domestic partner," "family member," and "dependent." You may want to contact your employer's health insurance company directly before enrolling in coverage.
- Unlike reimbursements to legally married couples, employer-provided domestic partner health insurance benefits are not exempt from federal taxes, and state tax exemptions vary. Additionally, pre-tax dollars from flexible spending or health savings accounts cannot be used to cover domestic partner benefits. As a result, these benefits are counted as income to the employee.
- Domestic partners may want to consult an attorney to create a healthcare proxy or power of attorney document. This document, not required for legally married spouses, allows for hospital visitation and authorizes your partner to make medical decisions if you are unable to do so.
- If your marriage or domestic relationship dissolves and you are receiving benefits from your partner's employer-sponsored group health plan, you may be entitled to continue your coverage for up to 18 months under the federal Consolidated Omnibus Budget Reconciliation Act (COBRA). Check with your state insurance department for COBRA laws in your state.
Life Insurance Considerations for Domestic Partners and Same-Sex Couples
- Be sure to list your partner as beneficiary on all individual and company-sponsored life insurance policies. While the marriage equality ruling renders this a non-issue for married same-sex couples, in the absence of a will, state laws that do not recognize domestic partnerships may not recognize a non-married partner as a legal heir.
- Depending on the domestic partner insurance laws in your state, as well as state and federal tax implications, it may make sense to hold your life insurance policy in a trust and name the trust as beneficiary. Before enrolling in coverage, consult an attorney, tax or financial advisor familiar with your state laws.
- By getting married, same-sex partners in marriage and business may be able to simplify life insurance policies, removing contingencies such as interlocking plans that protect against exorbitant estate taxes when one partner dies. If you haven't read your life insurance policy recently (or ever), now is good time.
- Whether you choose to marry or not, don't designate a minor child as a direct life insurance beneficiary. Instead, name a contingent beneficiary or trustee to act as beneficiary on behalf of the child. Otherwise, the life insurance benefit may not be accessible to the child until your estate is processed through the courts.