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?