4 Reasons You Need to Buy Life Insurance

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No one likes to think about dying, but since it is inevitable, it’s important to plan ahead. In addition to creating a will or a trust and naming beneficiaries on retirement and bank accounts, you may need to buy life insurance. A life insurance policy is the best way for many people to leave money to their families to cover funeral expenses, replace income or simply have some money to leave behind to the people they care about. Here are some other reasons you may need to buy life insurance.

  1. You have student loans from a private lender.

Federal student loans are forgiven if the borrower dies. This also goes for ParentPLUS loans. If the parent or the student dies, the loans are forgiven (and, unfortunately, treated as taxable income). However, private lenders aren’t required to provide the same forgiveness and some will demand immediate payment of the loans in full upon the death of the borrower.

If you have taken out student loans from a private lender and someone co-signed those loans, you should see if you are eligible for a cosigner release or take out a life insurance policy so that the individual or individuals who co-signed for you aren’t ruined financially if you die. If you are a parent and have co-signed student loans for your child, you can also take out a life insurance policy in your child’s name. Regardless of who takes out the insurance policy,  make sure you are purchasing enough to cover the loans and any interest that may accrue.

The same advice applies if you are married and want to protect your spouse from having to pay back your loans. If you live in certain states (including Arizona) loans that you took out during the time you were married will become your spouse’s responsibility, generally speaking.

  1. You have children—young or old—who depend on you for financial support.

Did you know that 63% of parents aged 55 and older still support their children or grandchildren? Who would replace that income if you were to die tomorrow? If you provide financial support to someone in your family and he or she would not be able to live without it, you need to buy life insurance to replace that income if you die.

If you have a child with special needs who will need care throughout his or her life, it is especially important to make sure there is enough money provide them care if you die unexpectedly. You should estimate how much money will be needed to take care of your child if you were to die tomorrow and then start making a plan.

You will need to set up a special needs trust and, when you buy life insurance, name the trustee and trust as the beneficiary. Setting up a trust is important because if you simply name your child as the beneficiary of your life insurance policy, you will disqualify him or her from receiving government assistance. That’s because people with disabilities can’t have more than $2,000 worth of assets in their names in order to qualify for government financial programs.

  1. You have installment debt.

Installment debt refers to a loan that requires the borrower to make fixed payments for a fixed number of months. Do you have a car loan or a mortgage that isn’t paid off yet? You aren’t alone. Out of all the individuals ages 65-74 who have installment debt 64 percent have car loans that aren’t paid off, they are still in debt an average of $2300 from student loans and 41 percent have mortgage debt, according to the LIMRA Secure Retirement Institute.

This is especially important to keep in mind if you have a mortgage. Whoever inherits the house and the mortgage will be responsible for making payments. If they can’t afford to make the payments, the bank can take it back or it can be seized to pay other debts. If you don’t want your family to inherit your installment debt, you need to buy life insurance so that those debts can either be paid off or the person who inherits them can afford to make the payments.

  1. You have a pension that ends when you die.

Some pensions don’t have a survivorship option. This means that your spouse won’t be able to receive money from your pension if you die. If this happens, he or she may not have enough income to cover expenses. Luckily, you can replace that income stream with life insurance.

To figure out how much life insurance you will need, you can use this life insurance calculator or call an insurance agent who will be able to answer all of your questions. It’s important to keep in mind that the older you get the more expensive life insurance will become and the more difficult it will be to get, in general. It is extremely easy and relatively inexpensive for a healthy 20-something to get life insurance, but is much harder to get life insurance as you get older. That’s because the older you get the more likely it is that you will die. So if you need to buy life insurance for any of the reasons on this list, don’t delay.

If you buy life insurance when you are young, you can always add to it as you get older and your situation changes, like if you have kids or get married. The important thing is not to wait to get life insurance until it is too late. Because if you die without it, there aren’t any re-dos.

How to Insure Your Personal Belongings

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One great thing about a renters, homeowners or mobile home insurance policy is that it allows you to insure your personal belongings. However, many people don’t take the proper steps to ensure that their belongings are protected if they are lost stolen or damaged, rendering this feature of their insurance policy useless.

Here’s how to make sure your insurance policy will be there to protect your personal belongings when you need it.

Make sure you have the right type of insurance policy

This is an issue that comes up especially often for renters. Many landlords require tenants to have renters insurance so that they are protected if someone is injured or sustains damage to their property while on the property. A renter’s insurance policy can also pay for damage caused to the property by the tenant so that the landlord doesn’t’ have to make a claim on his or her own insurance policy. However you’re your renters insurance policy doesn’t have coverage for personal belongings, then it won’t do you any good if your items are damaged, lost or stolen.

Many apartment complexes in Arizona offer liability insurance through an affiliate so that renters can just add on the cost of the insurance to their monthly rent. It’s important to carefully examine the details of this insurance policy. Some renters are under the impression that the insurance offered by their landlord will protect their belongings if they are lost, stolen or damaged, but that is not usually the case. Normally, the landlord with only offer liability insurance. That alone does not insure your belongings.

Insuring Expensive Items like Jewelry and Electronics: So you have an insurance policy that says it will cover your belongings if they are lost, stolen or damaged. All set, right? Not necessarily. If you want to insure your personal belongings that are very expensive–think $1500 or more–you will most likely need to purchase additional coverage. That’s because your standard insurance policy may max out before it pays for you to replace your expensive handbag collection or home theater.

To avoid this gap, you can purchase a supplement to your insurance policy called an endorsement, or a floater, that will provide protection for your expensive belongings. It may cost you a few hundred dollars more a year to protect your most expensive items, but many people find that the peace of mind it brings is worth it.

So how do you know if an item needs an endorsement or a floater? Find out how much your insurance policy will pay out for each item you might need to replace. If your policy will only pay you $1000 to replace your diamond necklace, and it’s worth $5,000, you will need to buy additional protection if you want your item to be protected. Each time you acquire an expensive item, call your insurance company to let them know so they can talk with you about options for insuring.

Take inventory of all your important belongings

Many people can’t take advantage of the protection that their homeowners or renters insurance policy offers because they haven’t kept detailed records of their purchases. An insurance company won’t be able to help you insure your personal belongings and help you replace them if you can’t prove that you ever owned them.

To do this, you should take photos and video of all of the items you want to insure. Some common items to start with are furniture, expensive clothing, electronics like TVs and laptops and jewelry. Some people do video walkthroughs of their homes, filming their belongings as they go. This is a great way to provide proof of your belongings and it doesn’t take much time.

Now you need to start a list to keep track of the items you have. The list should include:

  • Exact product name
  • Detailed description of the item
  • Price you paid for the item
  • Price the item appraised for (if applicable)
  • Whether or not you have the receipt (and a photo or screen grab of the receipt if you do)
  • The serial number or identifying number (if there is one)

The Insurance Information Institute has a free home inventory tool that allows you to create and maintain a home inventory and keep it stored safely in the cloud. If you don’t want to use a tool like this, you could just create your own list and store it on your own cloud-based storage or email it to yourself. That way, even if everything you own is destroyed in a fire, you will still be able to access your proof.

Update this list regularly and save all necessary documentation—this includes owner’s manuals and receipts. You can take photos of the receipts and add them to your list, but it’s also a good idea to come up with a filing system for your really important receipts.

How much it will cost to insure your personal belongings

Once you have completed you home inventory list, add up the value of all of the items you have written down. This will give you an idea of how much insurance coverage you will need. In general, the larger the cost of your items, the more your monthly premium will be. If you are a renter, you can get coverage for up to ten or twenty thousand dollars worth of items for a very low premium, often less than $150 per year. Keep in mind, for any very expensive items you may need to purchase a floater because your policy may have limits in place for how much it will pay you for each item.

Be honest.

Never intentionally over-estimate how much your items are worth in hopes of getting more money from the insurance company. Doing this is a felony and if you insurance company thinks you are being dishonest, your settlement can be drawn out for weeks or months. Do the right thing so your insurance company can help you.

If disaster strikes…

If your home is burglarized or your items get damaged or lost, give your insurance agent a call right away. You should also read through the most current version of your homeowners insurance policy so you know what to expect when making a claim. If you didn’t plan ahead and don’t have proof that you owned the items that were lost or stolen, you will have a hard time getting any help from the insurance company to replace them. Search for receipts for online purchases in your email or online accounts, check for proof of purchase on your bank or credit card statements, and look for photos or videos taken in your home that might contain images of the belongings that were stolen.

 

If you want to insure your personal belongings and gain some peace of mind, give us a call at Gebhardt Insurance Group. We shop more than 40 different insurance carriers to find you the coverage that best fits your lifestyle and budget and we can walk you through how to insure your personal belongings. Call us today at 520-836-3244 or calculate your coverage costs now.

Should I file a homeowners insurance claim?

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A homeowners insurance claim could cost you more than just your deductible.

So you came home from work to find your floor covered in water.  What now? Your first thought may be to call the insurance company to get someone to come out to look at the damage, but knowing when to make a homeowners insurance claim and when to fix the damage yourself could save you money—right now and in the coming years.

Here’s what you should do to make sure you choose the repair option that will save you the most money upfront and ensure that your insurance rates don’t skyrocket in the future.

Ask a professional first.

Without knowing the extent of the damage, it’s hard to estimate how much the repairs will cost to determine whether or not you should file a claim and pay the deductible or pay out of pocket.

It’s a good idea to find a reputable restoration company to come to your home and take a look at the damage. They will be able to tell you how much damage is done, what it will cost to fix it, and may even be able to give you advice on whether or not to make an insurance claim. Slate Restoration, a company based here in Arizona, will educate you about your options so you will know whether or not the problem is something you can fix yourself, pay them to fix for less than your deductible, or if you really do need to make an insurance claim.

Determine the cause of the damage.

Is your roof leaking because you should have had some shingles replaced a while back? Did a water pipe burst due to negligence on your part? Don’t attempt to claim any type of damage that was caused due to a lack of routine maintenance because even if your claim is denied, your insurance rates may go up.

Know what types of damage are excluded from your policy. For example, many policies don’t cover termite damage, sewer backups, and mold.

Know your deductible.

Sometimes home insurance deductibles work a little differently than auto insurance deductibles. Depending on your policy, you might have a typical flat-rate deductible (like you do for your car insurance) or you might have a percentage-based deductible that’s based on the insured value of your home. There’s also a split deductible, which works like a flat rate deductible for most claims, but changes to a percentage-based deductible for particular scenarios laid out in your policy.

Home insurance deductibles vary greatly. Like $500-$25,000 greatly. It may seem like a no-brainer that you should pay your deductible if your damages are going to exceed that number. However, there are other things to keep in mind when making this decision, like how much your insurance premiums will go up if you do make the claim.

A $1000 claim now could mean higher insurance premiums for years to come. A report released by InsuranceQuotes.com found that, on average, a single claim will raise your monthly premium by 9% and a second claim could raise them 20%.

Some insurance companies will even drop you if you make too many claims. After that happens, it might be hard to find another company to insure you thanks to CLUE (the Comprehensive Loss Underwriting Exchange). It’s a database that tracks your auto and property insurance claims going back seven years. It’s available to all insurers and they use this information to determine whether or not they can cover you and how much to charge.

Pay out of pocket if you can.

Think about your homeowners insurance policy as a backup in case your home sustains catastrophic damage, like in a fire. If the repairs are going to cost you $3000 and your deductible is $1000, it may seem like the right idea to make the claim and pay the deductible. But if you are able, you should really try to pay for the repairs out of pocket. That’s why it’s so important to have an emergency fund set up.  Some repair companies will also let you make payments if you aren’t able to pay for the repairs upfront.

It may be frustrating that it isn’t advisable to file a homeowners insurance claim every time your home sustains damage, but just remember that your homeowners insurance is there for you if major damage happens in the future. And the money you pay each month for that peace of mind is totally worth it.

And if you think you are paying too much for your policy, let Gebhardt Insurance Group shop around for you. It’s our job to find you the best value for your homeowners insurance policy. Give us a call at (520) 836-3244 or get a free quote right now.