INSURING OUR WELL-BEING
Traditionally, people have purchased insurance to protect themselves from possible losses arising from accident, theft and disaster. Insurance may also be used to provide for dependents’ future financial needs in the event of a breadwinner’s death. The fact is that insurance can play as important a role in assuring financial well-being as in reducing risk. Either way, insurance makes it possible for families and individuals to maintain a desired standard of living. Whether used to provide health or death benefits, a vehicle for savings, a plan for retirement or protection of home and automobile, insurance is an important factor in our lives. The intent of future columns in this series is to provide information about insurance products and buying strategies.
NOTE: Until the mid-1950s, homeowners had to purchase individual policies to cover separate perils that could pose risks to their home.
BE SMART WITH PETS
Some pet lovers may think it is too restrictive to harness their pets into cages or safety belts while driving. However, failure to do so can prove to be dangerous and even fatal. In fact, according to a recent study, driving with a dog in their laps may be equally distracting as texting or talking on a cell phone while driving. This is especially true of older pet owners. Analysis of the driving records of licensed drivers ages 70 and older who regularly took their pets for rides (usually in the passenger or back seats) showed that they had double the risk of crashing as their counterparts who never drove with pets. Pets should be restrained with good-quality harnesses.
HINT: Any activity that takes your mind and/or eyes off the road reduces your awareness and response time.
If home is the repository of all we hold dear, consumers should be very clear about what their homeowners policies cover. Standard HO2 or HO3 policies cover damage to the home and other structures on the property from threats such as fire, tornadoes, and lightning, but they do not cover earthquakes, hurricanes in some areas, and flooding. Extra coverage must be purchased to protect property and possessions against these perils. Moreover, it is important to insure the “replacement value” of a home, which is usually higher than the tax-assessment value and market price. In addition, an “extended coverage” rider adds up to 30 percent to replacement value to cover higher material and labor costs associated with a natural disaster.
NOTE: The “ordinance” or “law endorsement” rider to a homeowners policy covers the higher costs associated with making repairs that conform to updated building codes.
BUSINESS OVERHEAD EXPENSE INSURANCE
If the owner of a small business were to become too sick or injured to work, he or she would need to do more than protect his or her income. Funds would also be needed to pay business expenses, keep the business investment intact, and protect key employees. The answer to these concerns is “business overhead expense” (BOE) insurance, which keeps small- to medium-sized businesses running while owners recover from disability or illness. It is also designed for professionals such as doctors and dentists, who need to have the ongoing operating expenses of their businesses paid while they are unable to work. BOE is a subcategory of disability insurance that keeps things going until the small-business owner returns to work.
NOTE: With respect to an individual disability policy, “total disability” means you cannot work at all, while with a BOE insurance policy, total disability means you can’t perform the required functions of your occupation.