Wednesday, May 19, 2010

Insurance Coverage

I covered the main ways of diagnosing your financial health in this past post.  I've been using Wednesdays to go further in depth on each point since I truly believe that financial health leads to less stress and happier lives.

I have already covered the first five points - Spend Less Than You Earn, start an Emergency Fund, review Retirement Savings, evaluate Debt, and Diversify your investments.  The sixth point is to make sure you are insured correctly.  This means having the right amount of health insurance, car insurance, life insurance, disability insurance, and homeowner's insurance.

Health Insurance

Health insurance is vital for good financial health since health problems can cost so much.  I'd suggest having a policy that at least covers the basic doctor visits and emergency situations.  I'd also pick a deductible that wouldn't eat my whole emergency fund.

I have the standard plan offered by my company for free.  My copay is $25 a visit.  I pay $10 for generic prescriptions and $30 for preferred medicines.  If I need more than 3 months, I have to order it from Medco in 3 month supplies for 2 1/2 times the regular charge.  Wellness visits like annual women's exams are 100% covered.  My annual deductible is $600 in-network and $1500 out-of-network.  I haven't needed major medical attention yet, so all I've dealt with is doctor's visits and Medco.

I also get free vision and dental insurance.  My annual eye doctor visits cost $20, I can get basic new lenses for free every year, and I get $150 or less frames for free every 2 years.  That's all I've taken advantage of.  Contacts would be covered too, but I can't imagine putting those in every day. 

My bi-annual preventative dental visits are free.  If I need any work, I pay 20% for basics and 50% for any major work.  So far, I've only used the free preventative visits although I keep getting "suggestions" to get braces.  Yes, I have a little front-teeth overlap.  No, it's not medically relevant.  I don't look freakish, so I don't care.  Braces hurt.  I'm a weenie.  No braces for me.  Can't he just be happy that I don't have cavities and move on?

Car Insurance

Please don't make me explain the importance of car insurance.  In Texas, it's illegal to drive without it.  Collision and comprehensive coverage is optional if you own your car outright and will cover your car in accidents.  Liability covers the people and cars you hurt.  If you don't have any sort of car insurance, please get some.

My husband and I have a joint policy with Geico and pay $110 a month for full coverage on his Prius and liability only for my Aveo.  We have a $500 deductible.  I chose to stop paying for comprehensive and collision coverage for my car since it's only worth about $4000.  If it's wrecked, I'll buy another car using our emergency fund.

That $110 a month amount includes free towing to the closest manufacturer's dealer, which did come in handy for me.  One tow made up for years of the $7 I was paying every 6 months.  It also kept me from stressing out when my car overheated, so I'm a happy customer.

Life Insurance

Life insurance covers your family in situations I rather not think about.  I've heard recommendations ranging from none at all to a few million.  It's a personal choice.  I personally recommend having enough to leave your family with emotional trauma only.  If you have a giant emergency fund, you might not need as much insurance.  If you have a giant mortgage or kids, I'd suggest taking that into account.

We don't have kids and can live on one of our salaries if necessary, so we only have $100,000 life insurance policies right now.  My company gives me a free $37,000 policy and I pay $1.11 every 2 weeks for an additional $60,000 of coverage.

That $100,000 would cover the rest of the mortgage (about $70,000), the car (about $9,000), the cremation and viewing expenses (about $6,000 in our area), and leave $15,000 (6 months of living expenses without a mortgage) to be combined with our emergency fund for whatever time off we'd need to take.

Disability Insurance

Disability insurance covers a part of your salary if you are unable to work.  Mine covers 65% of my salary, but it would be tax free since I pay for it with after-tax money.  Short-term disability will usually cover you in circumstances that last 2 weeks to 6 months.  Long-term disability covers from 6 months until the policy says it ends.  Mine says it will cover me until my "normal retirement age".  I pay about $10.00 every two weeks for both types.

I'd highly suggest disability insurance since I can't think of a worse situation that being disabled and not able to contribute to our joint dreams anymore.  Honestly, if I die, I'll be dead and hope my husband will be okay.  If I'm disabled, I'd wallow and that would only get worse if I was unemployed and broke.

Homeowner's Insurance

Unless you own your home outright, homeowner's insurance is required.  Even when we pay off our home, I'd continue our policy since it helps when really awful things happen to your house.  The trick to picking out the right homeowner's policy seems to be to go with as high of a deductible as you are willing to stomach and enough coverage for major problems.

Our policy is $765 a year in Spring, TX and covers our house up to it's "rebuild" price of $165,000.  We chose a 1% deductible for everything but tropical storm damage, which is at 2%.  It also includes $80,000 of coverage for the items in our home, which is more than enough for us.  We spend another $320 a year on flood insurance from the state since policies in our area never include flood insurance already.

Do you agree with my take above?  Did I leave something out?


  1. This is a great post!

    Your health insurance is a million times better than ours, I have insurance envy! We pay 650 dollars a month for our health insurance and our copays are ridiculous.

    I completely agree with your view on disability insurance. I need to reevaluate how much we have in disability insurance for my husband. I am glad I read this!

  2. Nice post, all those policies are important!

    I, too, have health insurance envy...our isn't nearly as generous as BFS'! And I have not been able to find any disability insurance that would only cost $20/month. We were quoted about $120/mo. just for my husband.

    I will be looking into flood insurance due to the fact that areas around us that have never flooded before have been hard hit recently. We live close to the coast, so hurricanes may come by (though we're not likely to be in a direct path of one).

  3. I'm with the others -- you have great health insurance! And it's free, too? Are they hiring telecommuters where you work? ;)

    As far as types of insurance go, something I would add is long term care insurance. There are rules of thumb about what age to get it, but it's something I think everyone should consider as they age.

  4. Nice post. The types of insurance you mentioned are necessary, I agree. I also think Jackie brings up a good point on long term care insurance. Those costs can be astronomical, so it makes sense to know the pros/cons of that type of insurance.

    Also, what about personal articles? I know that separate policies can be issued for things such as valuable jewelery, etc.

    One other one that comes to mind is business liability insurance. If you do any independent work, it might be a good idea to consider such insurance or at least look into it.

  5. Right on time!
    I wrote about GAP insurance this morning and I met with a gentleman to discuss homeowners insurance and life insurance this evening

  6. For all my jealous readers *wink*, thanks for making my day. It's nice to feel like I have something special. :-)

    When I only make $35,000 a year after 5 years (started at $26,500), it's nice to think about the good points. Thanks!

  7. It's amazing how hearing about good health insurance is frustrating! I wish we had that option. I'm self employed so I pay $650 for a 5,000 deductible that covers just about nothing.

    Your company is smart to offer such great coverage for free, employees will stay just for the insurance!

  8. Everyday Tips, my mom switched their insurance to a high deductible plan that is saving them thousands and still covering absolutely anything over $5000. I'm not sure if it became available when my dad retired or not, but they were paying $800 a month and now are paying $3-$5 (seriously). Should I get the details?

  9. Holly, my $20 a month diability policies are due to getting it via my company's group rate. I don't know how much I'd have to pay for a policy if I lost my job...

  10. Jackie, long term care insurance is a good idea. I'll have to look into pricing...

  11. Squirrelers, you are totally right as well. You can get separate policies for personal items (like engagement rings, etc). Business liability insurance is also a great idea!

  12. Good list. I agree with you on all points.

    One I don't see on the list is renters insurance. Renters insurance is a very good idea for a renter. Landlords do not cover the property of renters usually.

    And as others have said you do have very good health insurance. Our 'free' policy has a $2400 deductible and 10% co-insurance. Getting your level of insurance would cost me
    about $1700 a year.

  13. Jamie, wow…$650 for a high deductible really sucks! I’d be frustrated too!

    Yeah, my company is run by a guy that reels you in with the promise of high caliber coworkers and awesome benefits. It’s the fact that they have a no-haggle salary policy that stinks (no one here has ever been able to talk them into a higher starting salary or a raise outside of the normal review periods). But, I stay for the benefits and out of pure laziness…I like being really good at what I do and having time to read and comment on blogs. Once they block that, I’ll be a sad camper…

  14. Jim R, renter's insurance is indeed important! Hubby and I only owned pre-used items that were easily replaced, so we blew it off, but got pretty lucky by not needing it.

    Wow...I actually didn't think my insurance was all that cool until this post since we have an even better policy if I was willing to pay about $780 a year...I'll get y'all the details if I remember at work tomorrow.

  15. I doubt that you will need a better policy...the one you have already is like gold! Esp. since you are young with no dependents and have a lot of savings set aside!

    Great that you have that safety net. When my husband semi-retires, he will start a new civil service job and we will have to give up his very good health insurance. I am nervous since I don't know what to expect from his future employer; I do know that an employee of the co. he will be working for pays $1200/month for just himself, the wife, and a 20 yr.-old in college. Not sure what type of deductible it carries. BLECH! I will be looking into the type of plan that your mother has (HSA?) and keeping the fingers crossed that we continue to be blessed w/good health.

  16. Holly, I agree, I will not be paying extra for the other policy.

    Yep, my mom said it was an HSA that they switched to...I'll get the details next time we talk. I hope everybody is blessed with good health too. I know hubby's medical plan is not nearly as good as mine, so he's just not allowed to get sick, lol.

  17. This is a great list. I agree with other posters, you have great health insurance. We pay $233 every month (that too through my husband's employer not an individual plan) to get a high deductible plan. We pitch in the first $5000 whatsoever.

    Coming back to the insurance list, I would add the extra riders though (flood, earthquake). Those are very important and may be the only disasters that will require claiming any benefits. It would be devastating after paying years of home owners and getting rejected for a claim after an earthquake. And as Jackie mentioned, long term care insurance.

    PS: This is my first visit to your blog. You have a great blog! Thanks for your work!

  18. Suba, thanks for finding me, lol!

    At first, I was thinking that $233 a month wasn't so bad, but for a high deductible plan? That's just not fair.

    I agree with getting the regional insurance - flood insurance for the Houston area is a must.