Wednesday, February 20, 2013

My Insurance Review

In light of recent events I figured today would be a good use of space to revisit my overall insurance game plan. Life in itself can be full of ups and downs and events that you plan for as well as ones that you don’t plan on. To me insurance is fundamentally about paying premiums to transfer risk.

Within the last week my wife began to feel ill and visited a walk in clinic near her office. In what felt like the blink of an eye she has now had a few diagnostic tests run and has a few follow up appointments on the horizon. **SPOILER ALERT** Thankfully my wife is doing fine and tests so far have ruled out anything seriously imminent, but this entire ordeal in itself has definitely brought insurance to the fore front of my mind.

Health Insurance

Through both of our employers my wife and I are able to carry individual health plans. I carry a high deductible plan along with a health savings account, and my wife has her health plan furnished free of premium through her employers. During our recent event a few passing thoughts have fluttered through my head. One of them is that life in itself can bring about enough stress and worry. It terrifies me to think of having to face the same situation without health insurance. I cannot even begin to imagine what it would be like to be in the middle of this same event and start to second guess whether to proceed with medical testing because the resulting bills would be too high.

 I actually used to be of the mindset that if a person did not have insurance available through work that maybe they could slide by and make it through just by playing the odds of unexpected events. Now I believe that medical insurance is something that you can’t afford to live without. Whatever it takes, seriously, work it into your budget. I have a few friends whom have been able to buy health insurance on the open market through one of Dave Ramsey's Endorsed Local Providers. While it is true that buying through work is cheaper premium wise, the benefits of having health insurance far outweigh the risk of being without it. Study after study I read state that medical bills are a top cause of bankruptcy. So to me a high medical insurance premium is a small price to pay for being able to cover any and all major unexpected or expected life events.

Mental Health

Piggy backing on health  insurance, in the last year I have begun to consistently see an individual therapist and my wife and I have begun to regularly see a couples counselor. After our insurance pays out all we owe for each visit is a co-pay of $17 and $20, respectively. To me these have been some of the best dollars that I have ever spent. In these regular appointments I am prioritizing growing and developing myself as well as my marriage. And if that weren’t enough, I regularly contribute pre-tax income every month to my health savings account to cover these co-pays, thus lowering my taxable income. It is quite the win-win scenario in my book.

Renter’s Insurance

For those of you fellow renters out there hear me loud and clear: If your apartment is broken into, lost due to fire or damaged due to a flood, the landlord cannot replace your items. I am the only person able to insure my possessions against any of the aforementioned events – and then some! So we carry a relatively low policy that covers around $20k for a few hundred bucks a year.

Dental and Long Term Disability

An odd pairing I know. We both carry a dental policy, furnished through our employer and stay up to date with our regular checkups.  Thankfully through my employer I carry long term disability insurance free of charge. If I were to be eligible to need LTD, then after 90 calendar days I would be paid 60% of my base salary all the way up to 65 years of age.

Term Life

It shouldn’t come as a surprise that I subscribe to Dave Ramsey’s philosophy when it comes to life insurance. That philosophy is to keep insurance and savings separated. When my wife and I were in our early 20s we bought 30 year level term policies equal to roughly ten times our annual incomes at the time. I’m a bit behind the 8 ball on this one since we should update our policy to cover our raised income amounts (hi honey, guess what we’re going to talk about tonightJ).

So instead of buying whole life policies where we pay endless fees, set ourselves up to have the insurance company keep our built up savings upon our death and get awful rates of return, we pay low premiums through our term policy and invest/save the difference on our own. In the event that one of us would need the funds of the term policy the implementing plan would be pretty straightforward. The surviving spouse would set aside 5 years’ worth of the departed spouse’s pay in a cash holding (money market account or simple savings account) and invest the remainder in the 4 categories of mutual funds that we invest in. This way the surviving spouse can maintain their standard of living for at least 5 years and be able to replace lost income over the long haul.

In conclusion none of this stuff is clean or easy to talk about. Just in these paragraphs I’ve had a flood of emotions run through me just considering “what if” scenarios. I can imagine how going through one can be gut wrenching and traumatic even before money enters the equation. That’s why I feel a solid insurance game plan is key to any road towards financial peace. With the right pieces in place I’ve been able to focus on what matters: the health of a loved one and not whether I can pay the bill or not.

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