The Role of Insurance in Your Financial Plan Insurance is an important element of any sound financial plan. Different types of insurance protect you and your loved ones in different ways against the cost of accidents, illness, disability and death. Generally speaking, the insurance decisions you make should be based on your family, your age and your economic situation. Following is an overview of various types of insurance along with suggestions to make sure you are adequately covered. Auto Insurance Auto insurance protects you from damage to your vehicle and/or from liability for damage or injury caused by you or someone driving your vehicle. It can also help cover expenses you or anyone in your car may incur as a result of an accident with an uninsured motorist. Auto liability coverage is necessary for anyone who owns a car. Many states require you to have liability insurance before a vehicle can be registered. However, state-required minimum coverage often does not provide adequate protection. Suggested minimums are $100,000 for medical expenses per injured person, $300,000 for the total per accident and $50,000 for property damage. Collision, fire and theft coverage are also advisable for a vehicle having more than minimal value. The cost of auto insurance varies greatly depending on many factors: the company and agent, your choice of coverage and deductible limits, where you live, the kind of vehicle to be insured and the ages of drivers in the family. Discounts are often available for safe drivers, nonsmokers and those who commute to work via public transportation. Homeowner's Insurance Homeowner's insurance should allow you to rebuild and refurnish your home after a catastrophe and insulate you from lawsuits if someone is injured on your property. Coverage of at least 80% of your home's replacement value, minus the value of land and foundation, is necessary for you to be covered for the cost of repairs. There are several grades of policies, ranging from HO-1 to HO-8, with increasingly comprehensive coverage and cost. As a baseline, most homeowners' policies cover the contents of the house for 50% to 75% of the amount for which the house is insured. The liability coverage in many homeowners' policies is $300,000. Life Insurance Life insurance, payable when you die, can provide a surviving spouse, children and other dependents with the funds necessary to maintain their standard of living. It can also be used to help repay debt and fund education costs. The amount you need depends on your situation. If you make $100,000 a year, have a sizable mortgage and two kids headed to an expensive college, you could need $1 million in coverage. Talk with an insurance agent who offers policies from companies whose financial strength is ranked high by rating agencies. And remember that you can shop around. Helpful Resources: Disability Income Insurance When you are unable to work for an extended period, a long-term disability policy is activated, replacing a portion of your lost income. Some employers offer some form of company-paid disability income insurance. Typically, such coverage is only partial and/or short-term in nature. Thus, many people seek to purchase an individual disability income insurance policy. When shopping around for disability insurance, try to get a noncancelable policy with benefits for life, or at least to age 65, and as much salary coverage as you can afford. Insurers will usually cover up to 65% of your salary. Generally, you should have total coverage equal to two thirds of your current pretax income. Health Insurance Most people enjoy medical insurance as an employee benefit, often with their employers paying whole or part of the premiums. Many employers offer a choice between HMOs (health maintenance organizations) and traditional fee-for-service care. Rates for HMOs are usually cheaper but have more constraints. Privately purchased health insurance is much more expensive -- often by several hundred dollars a month - depending on such things as deductibles, coverage choices and where you live. Long-Term Care Insurance With an aging population and uncertainty about the future of Social Security and Medicare, insurance to cover the high cost of nursing home or at-home health care is becoming more widespread. Medicare pays very little of the cost of long-term care in the United States. Medicaid will pay for the care, but only for patients whose assets are almost completely depleted.1 With Congress always debating the future funding of these programs, financial planning for long-term care is more crucial than ever. Medigap insurance can help pay medical expenses of the elderly not covered by Medicare. However, it does not cover custodial nursing home costs. In fact, about half of all nursing home residents pay for the care with personal savings.1 Contact a qualified insurance professional or AARP for more information on long-term care insurance. 1Source: www.Medicare.gov. This article was prepared by McGraw-Hill Financial Communications and is not intended to provide specific investment advice or recommendations for any individual. Consult your financial advisor, or me, if you have any questions. | 
