Dear Deborah,
My oldest child is off to college. I’ve heard that this is a good time to review our family’s insurance coverage. What areas should I be especially aware of? – Nora
Any time life circumstances change, it’s important to review one’s insurance coverage.
This is a good time to adjust car insurance and life insurance contracts, if necessary. Talk to your insurer about recent family changes.
Auto Insurance Policy
Teenage drivers can easily increase the cost of auto insurance bills. However, consumers don’t need to overpay for auto insurance. Here are ways to save money:
When a teen driver is added to the existing family policy, discounts can pass through the family policy to him or her. Save by having your teen drive the less expensive car.
Ask your car insurer whether there are good student discounts. High school and college students can save money on car insurance if good grades are maintained. If students have a B average or better, they can generally get a good student discount. These discounts can dramatically cut costs over time.
Some auto insurers give discounts if the college student lives on campus without the use of a car. If the student attends college more than 100 miles away and does not have a car while on campus, the policy cost will go lower.
Rental Insurance
If the college student is renting a home or apartment, he or she will benefit from having rental insurance.
This protects personal property that will need to be replaced if lost or stolen. Paying out of pocket for lost valuable assets could be costly.
Rental insurance is also important for liability purposes. It’s possible that the student could be sued by someone for injury in the home or apartment.
Life Insurance Policy
Life insurance is a way to protect family members who depend on wage earners for financial support. Without this additional cushion of income, the transition can be rough.
Traditional term-life is the least expensive type of life insurance. When making a decision on the amount of life insurance, insurers generally recommend an amount that’s enough to cover the wage earners’ income. It can also cover educational costs, anticipated taxes, mortgages, and other liabilities.
When purchasing term coverage, it’s better to get coverage for a 20-year term, rather than purchasing a 10-year policy and expecting to buy another policy in ten years for the same dollar amount. It’s likely premiums will increase and one’s health conditions may change.
When insurers receive a completed application, they generally won’t raise the premiums on a policy. The application process can typically take up to 30 days.
Keep the life insurance policy current. Besides replacing income, another benefit of a life insurance policy is that this income is tax-free.
Common Life Insurance Mistakes
Byron Udell, of AccuQuote.com life insurance quote service, informs us of some common life insurance mistakes and what can be done about them:
Not matching policy length to need. If you have small children, buy a policy that keeps you covered at least until they graduate from college.
Buying based only on price. The features and the financial strength of the company are always important – even at higher cost.
Mistaking “reentry” rates for renewal rates. After the level term expires, attractive reentry rates are available only if you’re still healthy. If you are not in top health, rates will skyrocket.
Source: Bottom Line
Could We Skip This Insurance?
Consumer Reports magazine lists several kinds of insurance policies most people don’t really need. These are some of them:
Credit-card-loss prevention insurance. Your losses due to card theft are already capped at $50 per card, by law. This loss prevention insurance can cost more than $100 per year.
Cancer insurance. Health insurance plans often include medical costs related to cancer treatments.
Accidental death insurance. Term life insurance is a better option since it’s highly unlikely you’ll die via an accident.
Copyright 2013. All rights reserved. Permission to reprint required.
Deborah Nayrocker writes on personal money management topics, showing others how to take control of their financial future. She is the award-winning author of The Art of Debt-Free Living and Living a Balanced Financial Life.
Publication date: October 21, 2013