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Make sure you have adequate protection for your home and auto, as well as life and disability insurance. This step will strengthen your finances and protect you and your family. The American Council of Life Insurers suggests life insurance coverage of five to seven times your annual salary. Visit www.insure.com or call 800-324-6370 to get rates on term or whole life insurance. Remember that good credit can translate into lower insurance premiums, as well.
Get a Clue – Your CLUE Insurance Score
In addition to checking your credit files and credit scores at www.myfico.com, you should also get your CLUE reports, which are files containing your auto and homeowner’s insurance claim history. Most insurers use a company called ChoicePoint to get your insurance score – so you should know that too, because it’s a score that’s different than your FICO score. ChoicePoint’s consumer website can be found at http:/ /www.choicetrust.com. At this website, you’ll be able to get your CLUE reports free of charge; you can also call 1-866-312-8076 for the reports. Your CLUE scores will cost you $12.95 each. Check the reports to make sure everything is accurate. You don’t want misinformation in these files to force you to pay higher insurance premiums. Just be aware, though, that since the average homeowner files a claim just once every 10 years, and the ChoicePoint data is only kept for five years, most people have no CLUE record.
Who Needs Life Insurance, Anyway?
Don’t operate under the misconception that life insurance is only for people who work full-time. Sophia Lezin was once surfing the Internet when a pop-up advertisement solicited her to buy life insurance. Not one to normally respond to such offers, Lezin nevertheless did answer the ad – and now she’s glad she did.
A mother of two small boys, Lezin’s youngest son, Luke, was born on Thanksgiving Day. She later hopped onto a web site and purchased a $500,000 life insurance policy to protect her family in the event of her death.
“I just felt a big sense of relief,” Lezin said. “Now, at least if something happens to me, Rich (the kids’ father) can hire somebody,” to take care of the numerous responsibilities she handles daily.
You see, Lezin was a stay at home mom when she got her policy. While she is now working, the value of the services she still provides day in and day out are enormous. Those chores include feeding and dressing the children, shuttling her six-year-old son, Jude, to school each day and administering medicine to the kids when necessary.
“All of these things would still have to be done,” if she were to die, Lezin said, in explaining why she opted for life insurance.
In a lot of ways, Lezin, who lives in Montclair, NJ, is the exception to the rule. Experts estimate that only a tiny fraction of the nation’s stay-at home parents buy life insurance – even though it could prove just as valuable to their families as it is to the families of working parents. Moreover, most Americans – in or out of the workforce – are believed to be significantly under-insured. While the average U.S. household has an income of about $50,000, the typical American household has life insurance of only about $196,000, industry statistics show.
So how much protection do you need if you’re not bringing home cash income? Statistics – and thus, the advice in this regard – vary widely. Jeremy White, a CPA in Paducah, KY, did some research to figure out the value of the services provided by a stay-at-home parent. His conclusion: the typical at-home mom renders about $60,000 in annual services.
Meanwhile, financial planner Ric Edelman, who runs Edelman Financial Services in Fairfax, VA, believes an at-home mother’s services are worth far more. According to Edelman, the 17 occupational duties a mother carries out – everything from child rearing to managing household finances to resolving family emotional problems – are more adequately valued at $508,700 in wages. (Edelman arrived at that figure by adding up the median annual salaries of the 17 occupations).
Experts do generally agree, however, that for most stay-at-home moms and dads, term life insurance is your best option. Compared with permanent life insurance, term life insurance is the most affordable and often most life insurance, term life insurance is the most affordable and often most year period, and the premiums are fixed.
If you’re a stay-at-home parent, you should know that some companies cap the amount of insurance they sell to you at $250,000. In Lezin-Jones’ case, she was able to purchase twice that amount, for around $400 a year. She got the increased protection after explaining to her insurer that she planned to re-enter the workforce in the next few years.
To learn more about life insurance, and to comparison shop for the best prices, check out any of the following web sites:
Financial advisors at www.insure.com also offer a comprehensive way to evaluate your specific life insurance needs. The guidelines they suggest are based on a variety of factors, including your short-term needs (for things like outstanding debts and emergency expenses); your long-term needs (for expenses such as mortgage payments); education (to cover your dependents’ college tuition); your family’s maintenance needs (to pay for child care, food, clothing, utility bills, insurance and transportation) and your current assets (including existing savings, stocks, bonds, mutual funds and other life insurance).
Five Types of Insurance That You Don’t Need
Although I advocate buying insurance as a way to protect your family’s interest, I also think there are some forms of insurance that are largely unnecessary. They are:
1. Hospital indemnity Insurance
A policy can cost a few hundred dollars per year, but it only provides you roughly $100 per day of cash coverage to pay for expenses if you’re hospitalized. That’s not a lot, when you consider that the average hospital stay costs about $1,200 a day.
2. Extended warranty/extended contract insurance
This policy is offered anytime you buy electronics or big-ticket items like DVD players or refrigerators. Usually the cost is very high and not worth it. Plus, when you buy on credit, the credit card company often extends the manufacturer’s warranty.
3. “Specific-health” insurance policies
This insurance protects you in the event you get cancer, suffer a stroke, or develop some specific disease. The problem is that this type of insurance is too narrow in terms of the coverage it provides, and these policies often have many exclusions.
4. Life insurance for children
Life insurance is meant to replace the income of the person who dies, to take care of that person’s heirs. Unless your kid makes a ton of money, or is in some way earning the family’s primary income, life insurance for children is a total waste of money.
5. Flight insurance
It only pays off if you die or get badly injured in a plane crash. And statistically the chances of that happening are extremely small. Don’t confuse this coverage, though, with trip interruption or travel cancellation insurance, which might come in handy once in a while.
