Have you ever had the moment when looking at certain insurance coverages and asked yourself, “Do I really need it?” Well, you are not alone.
Unfortunately, most people aren’t proactively aware of what coverages are available and at what points in their careers and lives they should evaluate them. This can be confusing, but it’s important to understand the basics of how insurance works and where coverage may be needed.
Let’s start with the basics.
in·sur·ance (noun)
a practice or arrangement by which a company or government agency provides a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a premium.
Simplistically defined, insurance is a financial safety net that helps you and your loved one recover after a bad event.
Imagine it’s your rainy-day fund. Here is how to set up and possibly use that rainy-day fund.
The first step is to apply for and get approved for a policy. During this process, insurers evaluate the insured's risk or the likelihood that they will make a claim.
An insurance policy is usually divided into four basic parts: the declaration page, insuring agreement, exclusions, and conditions.
The insured pays a premium to the insurance company or insurance broker for coverage.
If something happens that is covered by the policy, the insured can make a claim. The steps for making a claim may include:
The insurer pays out a predetermined amount of coverage for covered claims up to a certain limit.
Now that we know how insurance works, how does someone know what coverages might be valuable to them today?
Below is a roadmap broken into four life phases that serve as a great guide to help you better identify what coverages may make sense for you.
Find your age on the bottom axis of the chart and see what product solutions are available to you through the ABA Insurance Program.
Now, let’s explore Phase 1 and Phase 2, as those phases are more likely to apply to you.
Young adults are getting their feet wet in the working world and may have more limited financial obligations. However, there still is the need to plan for the unexpected. Depending on your age, you may be evaluating health insurance coverage for the first time, making rent, mortgage, or auto loan payments, and tackling student debt. There are product options that can be impactful to you even in this life phase.
At this point in life, your earnings from work will likely grow significantly, and your life will likely get more expensive. Financial obligations are increasing, and long-term financial goals are becoming better defined. Getting married, having children, insuring a house and multiple cars are all potentially on the table.
Now that we have identified some coverages that may be valuable, you have options regarding how you purchase coverage and who you work with.
There can be confusion between what an insurance broker does and what an insurance company does.
For many coverages, you can buy directly from an insurance company. If you do so, it would be recommended to evaluate that company, as well as others, to have multiple options to consider. Keep in mind that you will need to do that work on your own.
When working with an Insurance broker, you can be assured that they will act in your best interest. Brokers tend to understand the product marketplace and can show multiple options. In many cases, they may also have customized product solutions that are only accessible through one channel.
Working with an insurance broker provides vetted options, customized policies, knowledge, guidance, and advocacy on your behalf.
It is important to evaluate coverage every few years. If you have a good record and only a few claims over an extended period, you can easily find savings.
Here are some key life events that spark securing or updating coverage.
Firms are eligible for group medical coverage if they have two or more enrolled. Group medical plans can provide small firms access to more options and better rates than individual and family medical plans.
If you own a firm or are planning on starting one, BOE is essential protection. Always remember that disability insurance keeps the lights on at home, and business overhead expense insurance keeps the lights on in your office.
Often purchased by those who have significant assets (savings accounts, cars, houses, boats), swimming pool or trampoline, own rental/investment properties, own a business, coach youth sports, or want to protect the potential loss of future income. Umbrella supplements other policies and could be helpful in protecting you from financial loss.
ABA Insurance is a member benefit program administered by USI Affinity. It provides members access to product solutions, member benefits and savings, and valuable resources to help protect you, your family, and your firm. Join your fellow ABA members and explore the program today at www.abainsurance.com.
