Insurance Check-up: What You Need to Know

Yes

Most people recognize the importance of having insurance protection and wouldn't be without health, life, homeowner, and automobile coverage. But many of those same individuals are leaving themselves and their families exposed to a number of serious gaps in insurance protection. Read through the following information, provided by The Michigan Association of Certified Public Accountants, to determine if you need more specialized forms of insurance.

Renter's Insurance
Many apartment renters mistakenly believe that their landlord's insurance covers the contents of their apartments. This is probably not so. To protect your personal belongings from a number of perils including fire, theft, and vandalism, you need to have renter’s insurance. Renter’s insurance is similar to homeowner’s insurance, but it is designed for renters and it also provides you with some liability protection. Look for a renter’s policy that offers replacement value coverage, which means the policy pays what it actually costs to replace the damaged or stolen items. Actual cash value coverage pays only for what your property was worth at the time it was damaged or stolen.

Personal Liability Insurance
In these days of multimillion dollar lawsuits, standard homeowner’s and automobile policies don't always offer enough protection. Personal liability or "umbrella" insurance provides liability protection over and above what is provided by your existing homeowner’s and automobile insurance. Suppose someone was injured on your property and successfully sued you for one million dollars. If your homeowner’s policy provides only $300,000 of coverage, your personal liability policy would kick in where your homeowner’s policy leaves off. For the amount of protection you get, personal liability insurance is not expensive. Expect to pay a few hundred dollars per year for one million dollars of coverage.

Home Office Insurance
Many homeowners’ policies exclude computers, copy machines, fax machines, and similar home office equipment from coverage. If you work from home, you need to inform your insurance agent about your home-based business. You may be able to add to your homeowner’s policy an "incidental business option" rider that includes office equipment and general liability coverage for your business. However, if you are incorporated, have employees who work in your home office, and run the risk of being sued, you will need a business owner’s policy. Designed for small businesses, business owner’s policies typically provide extended coverage for your property, equipment, and general liability.

Private Disability Insurance
Most people don't realize it, but disability insurance is, in many cases, more important than life insurance. That is because, for all but the elderly, the chance of becoming disabled is much greater than the chance of dying. If you are working and rely on your income for daily living expenses, you should protect it with disability insurance. There are a number of variables you'll need to consider carefully: the amount of monthly benefit, the company's definition of disabled, the amount of time you must be disabled before benefits kick in, and the benefit period.

Medigap
New Medicare patients are often surprised to learn that Medicare does not cover all health care costs. Patients must pay a large deductible for hospitalization, and prescription drugs are not covered at all. Some years ago, Medigap, a private insurance program, was designed to fill in the gaps in Medicare coverage. There are now 10 basic types of Medigap plans with varying coverage options that are standard in all states. This makes it easier to shop around for the best plan to fit your circumstances and budget.

Long-Term Care Insurance
Long-term care insurance can be costly. However, with nursing home costs running anywhere from $40,000 a year and up, it can more than pay for itself if you need to use it. Be sure that any policy you consider covers home health care in addition to skilled, intermediate and custodial nursing home care, and that the policy is guaranteed for life. There are a number of variables in coverage that can help to lower premiums, so be sure to carefully research the options available.

Valuable Items Insurance
Most homeowner’s and renter’s policies have limits on how much coverage they provide for high-priced belongings. If you have expensive jewelry, fine artwork, furs, or antiques, you may want to speak to your agent about purchasing a separate rider for coverage.

Insurance protects your valuables and offsets costs associated with maintaining your health, but only if you have the right type and amount. Review your policy regularly to make sure you're covered.

You seek the expertise of CPAs at tax and audit time, of course. But CPAs also promote personal and professional financial security year round. Visit the CPA Referral Service on the MACPA website to search for a CPA in your geographical area or specific area of expertise.

This article was submitted by the Michigan Association of CPAs.

What Why How Where Home