Be Brave Not Safe

This continues our discussion on Mind the Finances, as a key step in creating a life of effortless abundance for ourselves, our families and others!

In this post we’ll cover the topic of using protection.

There are many risks to our financial standing that we can protect against. This includes unanticipated costs associated with:

• Healthcare
• Accidents and the resulting liability to others
• Disability
• Death

Let’s briefly cover each…

Healthcare

We all need it at some point in time. And, you will now be fined if you don’t have adequate health insurance coverage.

The primary objective, in my mind, is knowing and controlling EXACTLY what the TOTAL out-of-pocket expenses “could be” in a worse-case scenario. This includes the cost of the insurance, any deductibles and exclusions.

Too many plans, promoted front and center, and subscribed to by many, simply do NOT provide this. Check your policy to confirm…While the plan may provide “adequate” coverage, it is often not possible to lock-in the total out-of-pocket expenses that we may be required to pay.

It does not have to be this way…

We subscribe to a plan offered by Blue Cross Blue Shield, called Lumenos. In a nutshell, we chose a high deductible (the out-of-pocket expenses) that we’ll pay up-front (regardless of whether it all happens at once, or over the course of multiple healthcare-related transactions). Then, once this out-of-pocket is met any additional healthcare-related expenses are “all in” for the year.

For individuals (or families) willing to take on more of the up-front risk, insurance providers offer lower rates. The result: a lower cost insurance plan that covers us against the catastrophic healthcare-related expenses that could have a significant impact on the state of our finances.

Other plans charge a higher fee for healthcare that may not be needed in a given year, and they don’t provide a cap on the maximum out-of-pocket expenses that we may be required to pay.

Bottom-line: Do some research to ensure you aren’t paying for more than what is needed in a policy? And, determine if you can lock-in the “maximum” out-of-pocket expenses.

Auto Insurance

Do you know how much a telephone pole costs? We do 🙂

A few years ago one of our sons used his car as a missile and clipped one completely off! Thankfully there were no “major” injuries AND we were completely covered.

Moral of the story: Do NOT skimp on auto insurance. While some companies offer “name your price” insurance, the result does NOT guarantee that you have adequate coverage. At a high-level, there are 2 types of coverage available in an auto policy:

• Liability – Coverage for what we may do to someone else and/or their property, with our car.
• Collision – Covering the cost of repairing our own vehicle.

The most important portion is liability. Mistakes happen. And, they can become quite costly (in the 10’s if not 100’s of thousands of dollars). Check your policy. If you are not covered for “at least” $100k, your finances are at risk of significant / long-term impact.

If you are looking to save money on your auto policy consider a high deductible for collision. Then, if you are the cause of an accident you can tap your emergency fund (discussed in a prior post) to pay for the repair of your car.

Disability

At some point during our “working years” there may come a time when we simply cannot work due to injury or illness. And, just because work has stopped (including the associated income) does not mean the expenses stop. In fact, they may grow as a result of needing to pay for the related healthcare. As such, it is important to acquire disability insurance.

This is often offered by our employers. If so, subscribe. If not, contact an insurance company and obtain quotes.

If you are like me, in my younger years, I thought I was indestructible. I had a rude awakening when my motorcycle ride was abruptly interrupted by a driver not paying attention while making a u-turn – right in front of me. My velocity may have played just a “small” part in this 🙂

When I came to, me and parts of my motorcycle were strewn all about the street. The result: I was laid-up for over 3-months. Thankfully, I had subscribed to my employer’s disability insurance, which helped me to continue to float the boat (make my rent, car and motorcycle payments). Phew…

Death

I really don’t know why it is called life insurance. We are actually insuring for the handling of our financial obligations after we pass to the other side.

Do you have ANY debt? Who is going to pay off that debt when (not if) you expire? A co-signing parent, spouse or significant other? Not fair!

Do you have children, who you are planning to help through college? Who is going to pay for that education if you were to evaporate?

Anyone can obtain SIGNIFICANT life insurance at a LOW COST. Example: a 25-year old can acquire a $100,000 term life policy for around $12 a month. As we grow older the costs do creep up, a bit, but until we reach our mid to late 50’s it is still very reasonable. And, at that point, when the kids are on their own and our debt is paid off we really need very little (if any) life insurance…

If you have any debt, or children, it is your responsibility to acquire sufficient life insurance to handle YOUR financial obligations that will remain after you are gone.

We are all going to leave this place (for a better one 🙂 ). When we go, let’s leave behind good memories, untarnished by a pile of financial obligations that we didn’t handle while we were still able to fog a mirror.

More to come!