As important as your saving and spending habits are, being truly financially responsible involves much more. To this end, I’ve put together a list of ten ways to cover your ass(ets)… This list is by no means exhaustive, but it’s a good starting point.
(1) Buy life insurance. Of course this really only applies if someone depends on you for support. I’m a big fan of term life insurance — as they say, buy term and invest the difference! And don’t just rely on the insurance that you get through your employer… The base coverage may not be enough for your needs, and it’s also tied to your employment — lose your job and you’ll lose your insurance. Also, if you’re young and in good health, you can probably get a term policy for less money by shopping around instead of buying additional group through your employer.
(2) Buy long term disability (LTD) insurance. For the average Joe, the odds of suffering a debilitating injury are considerably higher than the odds of dying young. What if you couldn’t work? How would you get by? Long term disability insurance covers your butt in the event of that you suffer, well, a long-term disability (duh!).
(3) Buy health insurance. When you’re young and in good health, you feel invincible. But even a relatively minor health problem can prove to be a major setback if you’re uninsured. And a major health problem can be catastrophic. Even when I was young and dumb (and otherwise uninsured), I carried a major medical policy. It was only $50 or per month for a policy that covered accidental injuries and illnesses requiring hospitalization. While it didn’t cover things like the kidney stone that I had (and passed – ouch!), it did cover the stitches that I needed when I took a line drive off the noggin while playing slow pitch softball.
(4) Buy a personal liability umbrella insurance policy. Carrying personal liability insurance is particularly important for homeowners and/or those with substantial personal assets. Standard homeowner’s, renter’s, and auto policies provide a degree of liability protection, but a personal liability umbrella policy picks up where these other policies leave off.
(5) Write a will (or have one written). We finally took care of this at the end of 2006. Prior to that, we had a do-it-yourself will that was written back before we had kids #3 and #4. Bottom line: Having a will greatly simplifies the process of disbursing your assets after your death, and can go along way toward easing unnecessary burdens on your loved ones during an exceptionally difficult time.
(6) Name guardians for your kids. If you don’t, the court will. Hopefully they’ll make a good decision, but there are no guarantees. We took care of this along with our wills.
(7) Write a living will (or have one written). If you have specific wishes when it comes to healthcare decisions that might need to be made while you’re incapacitated, then you’ll want to arrange to have a like-minded person at the helm.
(8) Grant power of attorney (in writing) to someone you trust. If you’re ever incapacitated, someone is going to have to make financial decisions on your behalf. Wouldn’t you like to be the one who chooses who this will be? Same goes for healthcare power of attorney.
(9) Update your beneficiaries – If you don’t name beneficiaries, your investment accounts, IRAs, life insurance, etc. will go into your estate and will have to be probated. In our case, my wife and I have named each other as primary beneficiaries, and our testamentary trust as secondary beneficiary.
(10) Keep everything updated, and re-assess your needs periodically. This is an incredibly important point. If you don’t re-evaluate your situation periodically, your hard work will be all for naught, as your needs will change over time. For example, we bought term life policies in the summer/fall of 2005 but, after a number of major changes in our life, we needed to increase our coverage just one year later.
So there you have it… Ten (relatively) simple ways to cover your ass(ets)!
7 Responses to “Ten Simple Ways to Cover Your Ass(ets)”
Your list to protect assets is sound, but as a bankruptcy lawyer who sees lots and lots of family budgets, I’m horrified by the lack of preparation for retirement evident in those budgets. The number of the elderly filing bankruptcy suggests that one can’t live well on Social Security alone.
On top of uninsured, make sure you’re covered for underinsured too.
On your auto policy, increase the liability coverage, uninsured coverage and the PIP. Liability is obvious–at least $300k. Uninsured coverage is also important so that you have something to go after if you are injured in a car accident; get about as much as your liability coverage. Finally, PIP (personal injury protection) is when your auto policy pays your medical bills if you are hurt. Increase this to about $25k because you don’t want the health insurance hassle when you need medical treatment right away.
I would highly recommend increasing the minimums on your car insurance policies.
It’s no guarantee, but everyone should write down the serial numbers of their valuables: computers, PDAs, game systems, entertainment system electronics, firearms, etc. Take digital photos of valuables that don’t have serial numbers. Obviously, don’t keep this info just on your home computer. Burn a copy to CD. If your stuff ever gets stolen, it will greatly increase your chances of ever seeing it again.
Great list, and one I’ve been working on recently. I just purchased disability and umbrella liability insurance yesterday!
In addition to a living will, I would suggest a healthcare power of attorney.
As I understand it, the living will evidences your wishes, but it is not binding on anyone. The power of attorney designates the person who will make healthcare decisions for you if you become incapacitated. So, you want to name someone who you trust to carry out the instructions in your living will.
Nickel, I finally bought an umbrella policy on Monday and it was easier and cheaper than I expected. My 6 month premium is only $100 for $1m coverage through Geico. That price reflects the fact that I use the same insurer for home and car insurance. Anyway, it provides a nice sense of security. I provided a little more detail about it on my blog: