Insure Your Future

Too many people stock up on car and home insurance, but leave themselves and their families vulnerable to personal disaster.

Story by Charlotte Huff

Shopping for life, disability, and other personal coverage may seem overwhelming and costly. But waiting until middle age or later—particularly if you require individual coverage—can boost your rates and potentially even forfeit your access, insurance planners say. "At some point, we all pass the point at which we are insurable," says Bob Puelz, professor of risk management at Southern Methodist University in Dallas, Texas.

Consumers usually make one of two mistakes: They don't buy a policy, or they purchase coverage that provides flimsy protection when tragedy strikes.

Other insurance thoughts: Shop around for better rates. Don't count on your employer's coverage. And tell your family about the insurance you have purchased, so they don't miss out on the benefits.

Some insurance purchases and pitfalls to consider:

Health

If you don't have health insurance through your employer or spouse, shop immediately for an individual policy, Puelz says. That includes recent college graduates who may be only one ski accident away from emptying their savings accounts. "This should be first on a young person's agenda," Puelz says. Health insurers don't have to write everyone a policy. If you wait until you develop medical problems, you may not be able to afford—or even find—coverage.

Life

People usually purchase life insurance when they hear wedding bells or have children. Consider a policy even earlier if you want to lock in the lowest rates, says Brian Ashe, an insurance planner near Chicago and former chairman of the nonprofit Life and Health Insurance Foundation for Education (LIFE). And don't rely on an employer's coverage if you change jobs frequently. Only 50 percent of Americans carry some sort of individual life insurance, according to LIMRA International, a research and consulting group.

The next question: How much?

Calculate the cost of running your household annually and then add other variables, such as college costs and mortgage debt, Puelz says. A good rule of thumb, says Ashe, is to buy a policy that is 10 to 15 times your annual salary. "There is a huge shortfall between the coverage people have and what they really need," he says. For more help, check out the LIFE group's online calculator.

Disability

Young people are at a greater risk of being disabled than losing their life. And don't assume that a sedentary office-based job gives you immunity, Ashe says. Get quotes on a policy that would cover half to two-thirds of your current income. Insurers generally don't cover more than that because they "don't want to provide an incentive to linger" on disability, he says.

Long-term care

What if you require long-term medical care? The average cost of a private nursing home room is nearly $71,000 annually, according to an annual Genworth Financial's "Cost of Care" survey conducted in early 2006. Ideally, you should shop for coverage in your late 40s or early 50s, Ashe says. "Buying younger lands a lower rate. But weigh that lower rate and coverage today against the potential return of saving money until you need the coverage in the future, even though you will pay a higher rate. The likelihood of maintaining your insurability should also be factored," Puelz says.