Insurance: Does It have to Be (Such) a Black Hole?

Jacquette Timmons

If you are like most people, insurance is an after-thought; it is on the back burner along with the other aspects of life that tend to fall into the “I’ll get to that later” category. But risk management is essential at all times!

Given the plethora of options and providers, navigating the world of insurance can be confusing and complex. As you explore insurance options and/or confirm that what you have is what you need, here’s a primer to help you avoid two common insurance mistakes: Being under-insured and/or improperly insured.

A typical insurance question is, “How much coverage do I need?” It’d be great if there was a single answer, but there isn’t; your coverage needs depend upon a variety of factors, beginning with what type of insurance you are seeking (life, property: home/renters, health, auto, disability (especially for freelancers, self-employed and small business owners), etc. Ironically, even though most people lead with the question of “how much?” they frequently find themselves with an inadequate coverage amount. To avoid this, refer to websites like insurancecalculator.com to help you arrive at what dollar amount represents sufficient coverage for you and your circumstances. In fact, websites of this nature should always be your first stop; it’ll put you in an “informed position” when you meet with an insurance agent to review your options and make a selection. In addition to being more informed, it’ll also ensure you don’t go to the other extreme…getting too much insurance. Over-insured isn’t as common but it poses just as much of a problem as too little insurance!

In the United States, some types of insurance coverage are required by law (e.g., automobile); other types are optional (e.g., life insurance). It is with optional coverage that most people discover they are improperly insured. Typically, this is due to either having the wrong type of coverage or no coverage at all. For example, one of my coaching clients – a surgeon – didn’t have disability insurance. It had never occurred to him to “cover” his hands in the event something happened that rendered him unable to perform surgeries. If this occurred, it could potentially and drastically affect his livelihood. (He now has disability insurance.) Here’s another example and it’s connected to automobile insurance – a mandatory coverage: What happens if you’re in an accident and you don’t have collision coverage, only general liability?

Insurance is about protecting your and your family’s well-being. Buying and managing it requires upfront and on-going research. And just as you review your investment portfolio annually (or should), you’d be wise to apply the same discipline looking at your various insurance policies as parts of an insurance portfolio.