By Brandon Miller, CFP–
My great uncle’s poorly fitting toupee was a source of endless amusement to me as a kid. On hot days, it would slide to one side and the bald patch he was trying to hide would moon observers. In the wind, it might flap up and down, flip over an ear, or even blow off altogether. I had to enjoy the hilarity silently, however, as my elders made it clear that uncle’s wig was not something we talked about.
Insurance is a bit like that errant hairpiece in that it’s not something people talk about. Conversing about a commodity that’s only good when things go bad is a bit of a downer, after all. But it’s even more dismal not to have the right insurance and coverage amounts when you need it. So, let’s quickly review what you need and why, and some tips to help make insurance work better for you.
Consolidating policies at one company is easier on you and may lower your payment. Another general rule is to cover little things yourself (a bent fender) and have insurance pay for the big things (a totaled car). Higher deductibles and/or longer waiting periods can help you do this.
More tips include:
Health – Although not mandated at the Federal level, everyone needs health insurance, which many get through an employer or Medicare. If your employment status is “self” or “un” and you’re under 65, Covered California provides an open marketplace that might save you on coverage from brand-name insurers.
Got a high-deductible health plan? You might qualify for a Health Savings Account (HSA). The annual amount you and/or your employer can contribute each year is modest, but the money you put in isn’t taxed, the account’s earnings aren’t taxed, and your distributions aren’t taxed. It’s a hidden investment tool, if you ask me.
Auto – If you have a car, you need auto insurance, plain and simple. But maybe you can drop collision coverage if the car is really old.
Property – Anything with a mortgage requires insurance. But even if you own your property outright, it might make sense to carry some protection. Building costs are soaring, so double-check how much you’ll really get if your home and the contents are destroyed. A yearly review by your insurance broker or financial planner can help spare you from draining your savings at a vulnerable time.
Earthquake insurance has been improved recently, and becomes increasingly important the more equity you have in your home. Flood insurance might be smart if your property is in a flood plain. As for wildfires, homeowners’ insurance should cover the damage. It’s just hard to get policies in certain areas. The California FAIR Plan is designed to make this easier.
Umbrella – This has nothing to do with rain and everything to do with protecting your assets. It extends the liability coverage of your auto and homeowners’ policies and includes situations they don’t cover, such as mental anguish and psychological harm. Umbrella insurance is fairly inexpensive and I highly recommend most people get it.
Disability – Do you depend on a paycheck? Then you need disability insurance. Your employer’s coverage (if any) is likely inadequate, Social Security is notoriously stingy about who qualifies, and bills don’t end just because your income stream has. Get as much as you can qualify (and pay) for because living expenses don’t tend to go down over time.
Term and Whole Life – You can rent or own coverage for an untimely death. Term is great for temporary situations, such as until your mortgage is paid off. Whole or permanent insurance is more costly, but it’s also a way to build equity, fund a trust, add liquidity to your estate so the kids don’t have to sell the house to pay the taxes, and it offers tax-free accumulation to high-income earners.
Long-term Care – This coverage is for expenses related to nursing home care, home healthcare, adult daycare, etc. for those over 65. It’s expensive, so it may not make sense if you’re rich (estate worth over $5 mil) or poor (Medi-Cal will kick in). You have to qualify, so get it early—50–55 is an ideal age—especially if dementia runs in your family.
Yes, insurance is no fun, but don’t neglect getting what you need to truly protect yourself, your loved ones, and your lifestyle. Because lack of coverage is the last thing you want when a fierce wind uncovers your bald spot.
Brio does not provide tax or legal advice, and nothing contained in these materials should be taken as such. The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. Any past performance discussed during this program is no guarantee of future results. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional.
Brio Financial Group is a registered investment adviser. SEC Registration does not constitute an endorsement of Brio by the SEC nor does it indicate that Brio has attained a particular level of skill or ability. Advisory services are only offered to clients or prospective clients where Brio Financial Group and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Brio Financial Group unless a client service agreement is in place.
Brandon Miller, CFP®, is a financial consultant at Brio Financial Group in San Francisco, specializing in helping LGBT individuals and families plan and achieve their financial goals.
Published on August 11, 2022
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