Search:
Friday, September 10, 2010
Saturday, May 01, 2010

Common Insurance Mistakes - Are YOU making one?

By Rajiv Hargunani

We all know we need insurance but it’s not usually at the top of our priority list.  Insurance is a valuable tool to protect our families from unforeseen events that can severely damage their financial futures, but it does not often get much of our attention.  I have compiled a list of common insurance mistakes so you can determine if you are currently making any of them and hopefully properly insure you and your family before it is too late.

 ·        Not having any life insurance – Life insurance has two basic purposes: 

·        to provide estate liquidity and

·        to provide sufficient assets for a surviving family to live on after the wage earner has passed away.

·        Having too much life insurance – If substantial assets are accumulated, then survivors may already be adequately provided for.

·        Naming the estate as the beneficiary of a life insurance policy – This brings the policy proceeds back into the probate estate where it will be subjected to fees and expenses, inheritance taxes and creditor claims.

·        Failing to name contingent beneficiaries in a life insurance policy – If the primary beneficiary were to die first, then the proceeds of the policy could go back into the probate estate. It might be a good idea to review this with other documents such as wills, trusts and retirement plans.

·        Not having life insurance on a non-working spouse – The value of a “non-working” spouse, which can be substantial, is often overlooked.

·        Buying life insurance on children – Such coverage rarely makes economic sense unless the policy pays interest which is tied to current market rates.  The premium dollars could be better spent by contributing to a custodial account for the child’s future education needs.

·        Underinsurance of personal residences – Most homeowners obtain homeowner’s coverage and then forget about it.  They may fail to realize that if construction costs increase at 8% per year, the replacement cost of a property doubles every nine years.  Determine what your house (not counting the land) is really worth and then see if it matches your coverage.

·        Having medical insurance with inadequate lifetime limitations -- With the ever-increasing cost of medical care, it is easy to incur very high expenses for an extended hospital stay.  Many policies cover only $100,000 to $150,000.  The minimum coverage an individual should have is $250,000 to $500,000.

·        Not having disability insurance – You’ve probably heard it before.  Your family’s single greatest asset is more than likely your ability to earn a living.

·        Having a disability policy with too restrictive a definition of disability – Many policies cease coverage if the insured can perform any occupation after the second year of coverage.

·        Holding a disability policy after retirement – Make sure you aren’t paying premiums in retirement.

This material was prepared by Raymond James for use by Rajiv Hargunani, Financial Advisor of Raymond James Financial Services, Inc. Member FINRA/SIPC.

 

Print Friendly Version

(Permalink)