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Insurance Policies You Might Need

The Huffington Post The Huffington Post 20/10/2015 Terry Savage

What happens if the worst happens? That's how you have to think about insurance policies. We're all pretty aware of the need for life insurance - especially if someone is depending on your future income. And you wouldn't sleep well without homeowners insurance or auto insurance.

But there are other risks that you might not have considered. As you review them, the appropriate question to ask is: Could this happen to me?

1.Disability Insurance. What if you couldn't work because of an accident or an illness? Your savings should cover your expenses for a few months. But what if the disability drags on - and even prevents you from returning to your job, or from working at all? According to the Council for Disability Awareness, one in 4 of today's 20-year olds will become disabled before they retire!

That's the attractiveness of disability insurance, which is purchased from major life insurance companies. Your policy should replace at least 60 percent of your current income. Check the definition of disability. Does the policy pay if you cannot return to your > job, or only if you cannot work at all? (Think of a surgeon who injures his hands and might not be able to do surgery any longer, but could become a psychiatrist!) And ask how long you'll have to wait before the policy payments kick in.
(And note that employer-provided disability payments require you to pay tax on any benefits received. But if you pay the premiums with after-tax dollars, the payout is tax-free to you.)
2.Umbrella Liability Insurance. Your homeowners' policy also has liability coverage if someone is hurt on your property, and your auto insurance includes some liability coverage. But what if someone is hurt at your home and decides to sue you for more than the limits of your coverage? Or what if your teenage driver has a serious accident and you are sued? That's where an "umbrella liability" policy kicks in. Umbrella policies are sold in fairly inexpensive "chunks" of $1 million dollars or more for about $200 per million, per year. You will also be required to have the maximum underlying coverage on your homeowners and auto policies.
3.Professional Liability. If you're a physician, you truly understand the need -and huge costs - of medical malpractice insurance. But other professions can be hit with huge awards in lawsuits. That's why you'll want to consider "errors and omissions" or professional liability insurance. Lawyers and accountants have it. So think about how vulnerable you would be if someone sued you - whether you are a carpenter who is sued because a loose board causes a fall, or a plumber who set the hot water temperature too high, causing a scalding.
4.Directors & Officers Liability. You might not be a professional corporate director - but you could sit on an unpaid board of a community group or charity. And if you do, you're not immune to being sued! That's why you should ask about director's insurance before joining the board of a well-meaning organization, civic group, or even a local government.

5.Long Term Care Insurance. I can't stress too frequently the costs of needing "custodial care" as you age. Consider long term care insurance -either minimal coverage of $200/day for about three years, or a combo policy of life/long term care, which requires an upfront deposit of cash to be leveraged for custodial care - or leveraged in a death benefit for your beneficiaries if you don't need care.
These are all ugly possibilities--but they are indeed potentially huge and expensive issues. That's why it's worth thinking about the cost of insuring vs. the exposure you have to these risks. And that's The Savage Truth.

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