A friend of mine told me that when it comes to cooking, her mother likes to ‘”wing it.” No corn meal for tamale pie? No problem! Just use Cream of Wheat!
While this lady sounds like a spontaneous, fun kind of person, I’m not sure I’d like to be invited over for dinner.
After all to make something tasty, you need to start with the right ingredients. That doesn’t mean you won’t produce some duds on occasion, but at least you followed the directions.
Life’s like that too. You can’t predict what the future holds, but you can do your best to prepare for the good – and the bad.
In this, my second article on creating your recipe for financial success, I’ll explore a key component that can help protect you and your loved ones. Yes, I’m talking insurance…Not the most exciting topic in the world, but one that you need to add to your financial plan because it’s important. Here’s a brief look at the types of coverage most people need to consider.
Health
While you or your spouse is still serving, health insurance is almost an afterthought; it’s something you may even take for granted. However, leave the service before your eligible for retirement and you’ll be scrambling for information on the Transition Assistance Management Program (TAMP), Continued Health Care Benefit Program (CHCBP) and even the possibility of maintaining coverage through service in the reserve component. It’ll take some work to get your arms around the many variables and options associated with health insurance in the civilian sector. It may also take some work to get your head and bank account around the dramatic cost increase to get the same sort of coverage you’ve come to expect.
Life
As I’ve written here numerous times, everyone should spend a few minutes with a life insurance calculator to determine if they are adequately covered. Both the VA’s SGLI website (calculator currently undergoing and upgrade) and usaa.com have easy-to-use, detailed calculators to help you get started and stay on track. It’s especially important to revisit and revise the calculation when you add a child, buy a house or change careers. These type of life changes may require more insurance or leave you with less.
Disability
Disability insurance replaces your income if you’re unable to work due to long-term sickness or injury. The military and VA have a disability system and that’s a good thing since it’s difficult, if not impossible, for those on active duty to buy this type of insurance. When you leave the military though, you leave this benefit behind so it’s important to add it to your post-military to-do list. Many employers offer disability insurance but smaller companies might not.
Long-Term Care
Depending on your age (or the age of your parents), long-term care insurance might not even be on your radar screen at the moment, but it should be eventually. When you start planning your exit strategy from the workforce, this insurance can cover custodial care in your home, an assisted living facility or a nursing home should you need it. There’s a plan available through the government or you can purchase it individually. What you can’t do is expect Medicare, TRICARE, or TRICARE for Life to cover the costs associated with this type of care.
Auto
Auto insurance is mandatory in most states. But are you adequately covered? As your life changes, so will your needs. For instance, the more financially established you become, the more your need for liability coverage will increase. In other words, if you’re sued for “everything you’re worth” there’s more at risk. You should review your coverage each year to make sure it still fits your needs.
Homeowners/Renters
Like auto insurance, adequate homeowners and renters insurance is all about the types and levels of coverage you have. Cheaper isn’t always better, and the value of your home doesn’t necessarily equate to what it would cost to rebuild. Suffer a loss without sufficient coverage in place and those low premiums you’ve paid all those years won’t seem like much of a bargain. And yes, dog owners in Germany, as well as protecting your stuff, USAA renters insurance does include liability protection.
Whew, did you make it this far? That’s some laundry list and you may have skipped right over a couple of those items with the thought, “that doesn’t apply to me.” And you may be right – for now. But the thing to remember is that as life changes, so to does your need for the various types of insurance. At every major turn (baby, job change, house, separation, etc.) you should take a comprehensive look at all of your insurance coverage to ensure it remains a viable tool to help you avoid a financial disaster.
Posts in this series include:
Introduction: A Recipe For Financial Success
Part One: Preparation: A Key Ingredient in Financial Progress (this post)
Part Two: A Tried and True Money Golden Rule
Part Three: Emergency Fund
Part Four: Save Now For Retirement
Part Five: No Fighting Over Leftovers
Part Six: Tying It All Together
