Thursday, July 20, 2017
Am I Actually Covered? The Insurance Gap
This week is all about Life Insurance so in this post, I will talk about Insurance that isn’t all it’s cracked up to be. When most people think of insurance they think about home and auto insurance. When most people think about home and auto insurance, they think about crappy insurance that may or may not cover them. Making an auto insurance claim can be frustrating and costly. Often times the company will find a loop-hole in which they don’t have to pay you. This can be very frustrating. In the Life Insurance world, there are a few types of insurance as well that might not be exactly what you think they are. They may not cover you how you want or may not cover you at all. In this post, I will go over 2 of these products in order to shed some light and inform you of where you stand.
1) Group Life Insurance
Many people have group benefits where they work. These group benefits packages include group Life Insurance. Group Life Insurance can be a great thing. The reason why it is good is that you do not have to go through medical underwriting to obtain it. All you have to do is be part of the group, place of employment. There are several problems with group insurance, however. Depending on the size of your group, making claims affects everyone’s premiums. This is evident every year when it is renewal time and you see you deduction every pay period has gone up. Most of these increases are due to the higher costs of prescription drugs and specialty care, (chiropractic, massage therapy, etc.). Periodically someone within the group does die and a life insurance claim does have to be paid. If you have very few co-workers in the group plan, your costs at renewal will go up, sometimes dramatically. What this means is that you are paying extra for your co-workers. Group Life Insurance also usually only offers multiples of your salary. The typical coverage ranges from base amounts such as 10K-25K to 1 or 2 times your annual salary. This can leave some people dangerously underinsured. It then becomes necessary to obtain personal coverage to offset the inadequacies of your group coverage. Go through your employee benefits manual and truly understand what you coverage looks like or better yet have an Insurance Advisor help you.
2) Mortgage or Debt Insurance
Do you get calls from your bank to obtain debt canceling insurance coverage? I know I do all the time. Ever wonder why they provide this type of coverage and why they are so interested in you obtaining it? The reason they are so interested in you getting this insurance and why they will interrupt you during dinner to do so is because it is literally free money for them. Both of these types of insurance do what is called “post-claim underwriting.” What that means is that they only investigate what your health is, or was, after you make a claim. How this affects you is that you may or may not be covered how you think you are. Having your underwriting done after the fact makes it cheaper for the Bank involved. It also allows them to make the questions answered during the time of application as vague as possible. That creates a situation where you may think you are covered, but actually aren’t. Debt insurance also declines over time. A pretty simple concept is that as your debt decreases with monthly payments, that the coverage to eliminate it will decrease as well. Logically your monthly premiums should decrease as well, right? That is not always the case. Why should you pay $80 a month for covering a 300K mortgage in year 1 and spend the same $80 to cover a 150K mortgage in year 10? It makes no sense. What if your surviving spouse can easily afford the mortgage payments and wishes to use the money elsewhere? That is not an option with Debt Insurance as it only covers the bank’s money, not yours. You can obtain a policy for the same amount of coverage for the same price and use it how you wish. That is real freedom in my opinion.
I’m a no-nonsense kind of guy. I don’t like surprises and I don’t like the unknown. The problem with some forms of insurance is that it thrives on the unknown. Knowing where you stand and how much coverage you actually have is priceless. Flexibility, as well as certainty, is what personal coverage can provide you. As an Insurance Advisor, it is my job to de-mystify the products that exist and shows you which one is right for you. Personal coverage is always the best option and then you can have these other options as backups. Taking a few hours of your life to truly understand where you stand can save you a lot of money and heartache in the long run.
Thanks for reading my post today and don’t forget to tune in tomorrow for my Final Reflection on insurance week where I will describe my reasons for buying insurance for myself. Have a great day, Friends!
“I believe that the greatest gift you can give your family and the world is a healthy you.” – Joyce Meyer
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