Protect Your Young Family: A Comprehensive Guide to All Things Insurance

There are certain times in life when you need a safety net.

As you get older, you realize that you’re not invincible.

This is especially true when you start thinking about marriage and responsibilities that extend beyond just yourself.

When you find out your first child is on the way, for example, you begin to think more about your financial security and what the future will hold.

On the other hand, some parents with young families assume that they won’t need to worry about anything major until they’re older and that they’ll be “established” by then.

The unexpected happens and you can be left stunned and overwhelmed.

You need insurance because life is unpredictable. As much as you don’t want to think about it, you could get sick, your home could be damaged or you could be in an automobile accident.

Luckily, there are insurance policies that cover each of these disasters and more.

We’re going to dig into what you need to know about insurance: life, auto, health, short-term health, home, disability and vision/dental.

What is life insurance?

Life insurance is a contract that you enter into with an insurance company.

They will provide a death benefit – in the form of a lump-sum payment – if the insured person were to pass away.

You are responsible for paying a premium each month to secure coverage.

It’s typically chosen depending on the goals and needs of the owner.

Life insurance could be considered a pillar of personal finance.

If anyone depends on you financially, you need it.

Why do you need it?

Nobody likes to discuss the possibility of their untimely demise.

It’s not fun, but if you have people who depend on you financially, it’s a conversation you need to have.

If something were to happen to you, you would want your family to be provided for, especially if you have young children with years of schooling and activity ahead of them.  

A life insurance payout can be used for expenses like:

  • Funeral costs.
  • Medical bills.
  • Pay off debt or a mortgage.
  • Keep a business on its feet.
  • Finance education for children.
  • Allow a spouse to retire in the manner they planned.

When all’s said and done, you can’t put a price on the peace of mind that comes with knowing your family will be taken care of if tragedy were to strike.

What are your options?

You have a couple choices when it comes to purchasing life insurance coverage.

  • Term life insurance. This type of coverage is for a set number of years with a fixed premium. If you outlive that time frame, you are no longer covered. You would have the option to continue your coverage, but it would be at a much higher premium. Term life insurance is considered a “pure” death benefit. It’s primary purpose is to cover financial responsibilities for their insured or their beneficiaries. This could include consumer debt, dependent care, college education for children of the insured, funeral expenses and mortgages. A term life insurance policy doesn’t have any cash value, but the money that is paid out to your beneficiaries is tax-free. The draw of term life insurance is that it’s less costly than the permanent option.
  • Whole life insurance. While a whole life policy will have higher premiums than term, the coverage is permanent, with no expiration. This option also has a cash value, which can function as a type of savings account that accumulates over time at a tax-deferred status. A whole life policy is said to “mature” at the death of the insured or at age 100. In this event, the insured will receive the face value of their insurance policy in cash. In recent years, maturity ages have been increased to age 120, which preserves the tax-free nature of the death benefit. The most common uses for whole life insurance are funeral expenses, estate planning, surviving spouse income or supplemental retirement income.

The premiums for term and whole life insurance are normally a fixed amount over the life of the policy.

How much coverage do you need?

Too little coverage won’t provide the security you’re seeking for your family.

You don’t want more coverage than you need, either.

A good goal to shoot for when determining how much life insurance you need is to figure – to the best of your ability – how much money your family would need to keep up their current lifestyle.

You’ll also need to think about eventual college for the kids, retirement for your spouse, and any other responsibilities you have.

One area that is commonly overlooked is the amount of debt you have. Think of car loans, mortgages, credit cards and any other loans. Don’t forget to include interest when you’re crunching the numbers.

What is car insurance?

Basically, automobile insurance provides you with a safety net if you were to be in an accident.

Your car insurance policy will help to cover the expenses related to repairing or replacing your vehicle, as well as medical bills associated with an accident.

You can rest assured that you’re protected, even if you’re at fault or the other party doesn’t have any insurance coverage.

Why do you need it?

A big reason is the fact that it’s the law.

But, that’s far from the only reason to secure coverage.

Vehicles are expensive. So are medical bills. And accidents happen.

Your automobile policy will cover damages to:

  • Your vehicle.
  • Your passengers.
  • The other driver.
  • The other driver’s passengers.
  • The other driver’s vehicle.
  • Pedestrians.

A car accident can be a financial nightmare if you don’t have automobile insurance – not only due to the cost of replacing your vehicle, but also the possibility of lost employment if you can’t afford to get a new one.

The consequences can be great for your young family.

What are your options?

Again, legally you have to be covered.

The level of coverage is variable, however, and there are minimum requirements for each state.

It can be a bit overwhelming, so here’s a quick primer of what you need to know.

  • Bodily injury liability. This coverage protects you if you injure or kill someone while driving your car. It covers the injured person’s medical bills, lost wages, pain and suffering, and can even pay for funeral expenses. It will also pay for your legal defense if you happen to be sued as a result of the accident. This is one of the required types of coverage.
  • Property damage liability. If an accident was your fault, you are legally and financially responsible for the damages to the other person’s vehicle. This also extends to personal property or things like a street sign or a building, for example. Property damage coverage is also a required coverage.
  • Collision. This coverage will pay to repair or replace your damaged vehicle – even if you’re at fault. This is after you have paid the deductible. If the accident wasn’t your fault, your insurance company can attempt to seek reimbursement from the other driver. This coverage is optional, however, if your vehicle is leased or you have a loan, your lending institution may require that you obtain it.
  • Comprehensive. This optional coverage will cover damages that don’t come from a motor vehicle accident, such as theft, falling objects, vandalism, hitting an animal or a natural disaster.
  • Uninsured or underinsured motorist. In the event that you are injured in an accident that was caused by someone who is un- or underinsured, this coverage will pay for medical expenses and other related expenses. There is a cap on this amount, depending on the coverage option you choose. This is an optional policy.

To recap, the coverage that you’re required to have by law is bodily injury liability and property damage.

How much coverage do you need?

The amount of coverage you obtain over and above what is required by law is up to your own discretion.

The most important thing is to be protected financially if the worst-case scenario were to happen.

Keep in mind that in most states the minimum coverage that’s required isn’t enough to replace your vehicle should you suffer an accident.

Review your assets and the amount that you would be able to spend out-of-pocket.

Your insurance agent will be able to help you evaluate the right levels of coverage for your specific situation.

What affects your coverage rate?

There are several different factors that come into play when determining the amount you’ll have to pay for coverage.

  • Your motor vehicle records. Have you had several speeding tickets or been in an accident?
  • Your credit history. If you have poor credit or no credit history, you’ll typically pay more for your car insurance.
  • Your claims. The insurance company will look at how many claims you’ve made and how much money was paid out to you.

Your insurance agent will be able to help you evaluate the right levels of coverage for your specific situation.

What is health insurance?

Health insurance covers the cost of medical expenses, related to illness, injury, physical and mental conditions, including surgical procedures.

Health insurance may be provided through an employer in a benefits package or it can be purchased individually in the marketplace.

Why do you need it?

Health insurance protects you and your family financially when an unexpected illness or injury strikes.

If you have young children, you know how often they get sick and need to see a doctor.

That’s not to mention the bumped heads and stitches that are a common part of childhood.

A severe injury or an illness that requires hospitalization and treatment would be above the realm of what most people could afford to pay out-of-pocket.

No one can predict what the future holds and medical bills can be extremely expensive – sometimes to the point of financial devastation.

There is also a link between having health insurance and receiving better health care.

For example, those with health insurance coverage are more likely to have a primary care physician who they see regularly, which can help you and your family to stay healthy by providing preventative care.

What are your options?

If you’re covered by your or your spouse’s employer-sponsored health care program, your options may be limited to choosing whether or not you’d like vision and dental.

You may also have the choice between two or three plans that have varying premiums, deductibles and coverage.

If you’re purchasing health insurance independently  –  and you don’t have access to employer-provided coverage  –  you have a lot more to think about.

The Affordable Care Act (ACA) requires that you have some sort of coverage or face a penalty.

The best place to start is to get some guidance! Consulting with an independent insurance provider can help you to clarify your needs.

How much coverage do you need?

Step 1: Calculate

One way to figure out the amount of health insurance you’d need is to determine the highest amount of money you’d be able to spend out-of-pocket if you were to experience a major medical crisis.

That amount can act as a guide to the amount of a deductible you can afford.

Step 2: Premium

Next, figure out the amount that you can spend on the monthly premiums.

Keep in mind that a higher deductible will result in a lower monthly payment and vice versa.

Step 3: Risk

Another factor that’s important to consider is your health history and your risk factors.

If you’re young and healthy, you may opt to go with a higher deductible so that your monthly payment is more manageable.

A family with children may opt for a plan that has co-pays and a lower deductible due to the frequency of doctor visits.

What is short-term health insurance?

As the name suggests, this type of coverage isn’t a permanent solution.

The main purpose is to bridge the gaps in coverage that you may experience in a transitional period. Coverage kicks in quickly, can be canceled without penalty and there is a wide range of deductible amounts to choose from.

This type of insurance doesn’t fulfill your requirement under the Affordable Care Act and you could still face penalties even if you were covered by short-term health insurance.

Why do you need it?

Since it’s a short-term solution, there are some specific scenarios in which you’d opt for this type of coverage.

You may seek short-term health insurance if:

  • You’re between jobs.
  • You’re just coming off of your parents’ health insurance.
  • You have a new job and your employer-sponsored health care hasn’t kicked in yet.
  • You’re waiting until you’re eligible for Medicare.
  • You don’t have health insurance and you aren’t in an open enrollment period.
  • You’re a college student or you’ve just graduated.
  • You have a new job and you’re waiting for the benefits to kick in.
  • You’re losing coverage due to a divorce.

These situations can leave you grasping for straws in terms of health insurance – especially if you have young children who require regular check-ups and frequently get sick.

This temporary coverage may be just what you need at certain periods of your life to fill in the gaps.

What are your options?

Each insurance provider will have their own specialized plan options.

When you’re in the market for short-term coverage, it’s best to find one that has a deductible that you can afford should you or a family member face a health catastrophe.

How much coverage do you need?

The nature of a temporary health insurance plan means that your options for coverage are more limited.

Evaluate what you expect your needs to be in the near future.

Remember, this isn’t going to be coverage that you’ll have forever!

What is homeowner’s insurance?

This type of insurance will cover damage to your home, including losses and assets.

Basically, it safeguards your home and the items in it.

It’s also a form of protection for you if someone were to be hurt on your property or in your home.

This coverage extends to any damage caused by household pets, too.

There are exceptions: Earthquake and flood damage need to be covered under a separate policy.

Poor maintenance isn’t covered, either. The upkeep of your home is your financial responsibility.

Why do you need it?

Your home is probably the most valuable asset you have.

Unlike automobile insurance, home insurance isn’t legally required.

But, if you have a mortgage, your lender will probably want you to have coverage to protect their financial investment in your home.

In fact, your lender can actually purchase the insurance and will then charge you for the cost.

Let’s take a more in-depth look at what’s covered:

  • Physical building and attached structures. This includes things like decks and garages.
  • Detached structures. You may be able to get help with repairs for fences and sheds.
  • Personal property. There are certain belongings that you may be able to replace, as well as furniture and electronics. This includes theft.
  • You and the other people in your family. A liability policy may help to cover repair costs, medical bills or legal fees that are related to damage to someone else or their property if you are found legally responsible.
  • Visitors to your home. If a guest suffers an injury at your home, your homeowner’s insurance could help pay for their medical costs.
  • Additional living expenses. For example, if you and your family are displaced by a fire or other covered damage to your home, your home insurance may pay for you to stay in a hotel until you can return to your home.

The reality of your need for this type of policy will become quickly apparent if your child has a friend over to jump on your trampoline and the result is a friend with a broken arm!

Situations like this aren’t uncommon and, though it may seem like a silly example, you need to be prepared for any eventualities.

What are your options?

You do have options available for additional types of coverage.

Keep in mind that this list isn’t comprehensive and your independent insurance agent will be able to give you a complete picture.

Here are some of the most popular extras:

  • Water backup coverage. This would cover plumbing issues, such as a burst pipe. This is not flash flood coverage.
  • Enhanced dwelling protection. Some homeowner’s want to secure coverage for the rebuilding or repair of their home that goes above what is already covered. The reason is to offset a rise in the cost of construction or to supplement a policy that you don’t feel is adequate.
  • Identity theft expense coverage. Having your identity stolen can be a costly experience. This extra insurance can help you cover the costs related to getting back on your feet after identity theft.
  • Scheduled personal property endorsement. You may want to consider securing this type of additional coverage if you own something extremely valuable, such as art or jewelry.

How much coverage do you need?

If you’re like a lot of people, you may confuse the purchase price or resale value of your home with the cost to rebuild it.

When it comes to appropriate coverage amounts, you’ll want to consider the cost to rebuild your home, which is based on construction costs.

If you’re underinsured and disaster strikes, you’ll have to pay the difference out-of-pocket.

Your insurance agent will be able to help you determine just what you need and prevent you from being over- or under-insured.

As far as your personal property goes, 50% of your dwelling amount is the norm, though you and your agent can play around with this number in order to make sure you are adequately covered.

What are vision and dental insurance?

Vision and dental coverages will help to cover the costs of routine examinations, as well as a percentage of any necessary treatments.

Sometimes they are offered as a part of your employer-sponsored health care packages. You can also add a vision and/or dental policy to your health insurance coverage you purchase from the Marketplace.

Why do you need it?

The health of your eyes and your mouth are crucial to the health of the rest of your body.

People are much more likely to visit the eye doctor and dentist regularly when they have coverage.

If you have children, it’s vitally important that they understand how to properly care for their teeth.

Kids also need to have regular vision exams to catch any potential problems as early as possible. Issues with vision can affect their schooling and cause a multitude of other problems.

Plans will always vary according to a multitude of factors, but you can generally expect a vision plan to cover:

  • Exams. This is a preventive measure that is suggested to be done once a year. Regular eye exams can detect developing problems or identify the need for glasses.
  • Eyewear. Glasses and contact lenses can be a significant expense. They’re usually at least partially covered by vision insurance.
  • Lens enhancements. Some policies will cover coatings that decrease fog, moisture and scratches.
  • Surgery. Your regular health insurance plan should cover medically necessary procedures, however, your vision plan may help with elective surgeries.

Here’s what you can expect from a dental policy:

  • Preventive care. Dental exams and cleanings every six months are standard with most plans.
  • Restorative care. This would include things like fillings or other treatments for decay.
  • Endodontics. More involved procedures, like root canals, would fall into this category.
  • Oral surgery. Common oral surgeries would include tooth removal, draining infections and biopsies of gum tissue.
  • Orthodontics. The installation, maintenance and removal of braces and retainers are covered under this category. You’ll usually only be responsible for a portion of the cost.
  • Periodontics. This would include the treatment of infections, lesions and gum disease.
  • Prosthodontics. All the procedures related to dentures are expensive and dental insurance can offset a big chunk of this cost.

The bottom line is that proper care of your eyes and teeth is vital, but the cost may be prohibitive if you don’t have any coverage.

What are your options?

You can receive vision and dental insurance coverage from a few different sources.

  • They can be a part of a larger health insurance plan, either through you or your spouse’s employer or a health insurance package that you purchase on your own.
  • They can be supplemental, on top of the health insurance plan you purchase from the Marketplace.

Talking with your insurance agent will be a big help to guide you through the ins and outs of these types of coverage.

How much coverage do you need?

As with other optional plans we’ve mentioned, the best way to figure out the coverage you need is to look at your budget and figure out how much you can afford to pay out-of-pocket should you need a certain procedure.

Match your ability to pay with a premium that works for you.

Prepare for the unexpected

Insurance allows you to be ready for what life throws at you and can help you avoid financial devastation.

The truth is, insurance is necessary for young families, but obtaining it can be overwhelming.

When you work with a trusted independent insurance agent, you can rest assured that you’ll be getting the coverage you need to keep your life financially on track.

The peace of mind that comes with knowing you and your spouse and children are covered when life happens is priceless.

Insurance Young Family