Families should assess insurance needs

Your Money

May 14, 2006|By GREGORY KARP | GREGORY KARP,MORNING CALL

Not all families are the same when it comes to insurance needs. Established families with middle-age parents and older children need more of some kinds and less of others.

"As the value of your home changes, as your assets increase, as your children approach college age and your financial situation changes, quite likely your insurance needs are going to change at the same time," said Roger Sevigny, insurance commissioner of New Hampshire.

Here are some tips for evaluating insurance needs for an established family:

Life

Now is a great time for established families to re-examine their life insurance, for a couple of reasons. First, term life insurance -- the only type of life insurance most people need -- has become cheaper in recent years. That means it might be a good time to "refinance" your term insurance by purchasing a new policy and then canceling the old one. You could save money on premiums or obtain more coverage for the same price.

Second, depending on how old you are, you might need less life insurance than you once did.

For example, someone 50 years old with a working spouse, paid-off mortgage, and a child who has already graduated from college may need very little life insurance. Meanwhile, a 35-year-old with a stay-at-home spouse, a new mortgage and preteens would need more coverage.

Auto

Many parents are shocked by how much it costs to insure young drivers.

A teenage female driver can cause rates to rise 50 percent, while adding a young male driver can double your premium, according to the National Association of Insurance Commissioners. But some states don't allow for different premiums based on the driver's sex.

Either way, it's going to be expensive. So it's a good time to comparison shop for lower rates.

Home

Established families might be remodeling or building an addition to their home. If you are, you may need to update your homeowner's policy to reflect the changes, especially if you add $5,000 or more to the home's value.

Disability

These are your prime earning years. Buy all the disability insurance you can from your employer to replace some of your income if you become sick or injured.

Long-term care

If you're about 50 years old, it's time to start at least thinking about long-term care insurance, often thought of as nursing home insurance. It's expensive, but not nearly as expensive as a year in a nursing home, which averages about $70,000.

Gregory Karp writes for the Morning Call in Allentown, Pa.

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