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Insurance: Who Needs It?
Now more than ever, it's important to make sure you're covered. But what kind of insurance do you need? Which could be a waste of your money? Use this checklist to help you make sense of it all.

By Russell Wild
Winter 2008

Insurance Checklist, Part II (Winter 2008)

The Pros of Travel Insurance (June/
July 2007)

Thinking Long-Term (February/
March 2007)

Family First: Life Insurance (April/May 2006)

Long-Term Care: When the Quality of Life Carries a Price (Fall 2004)

More in Finances

During these trying economic times, shopping for insurance isn't anyone's idea of fun. Hispanics, however, seem especially averse. According to census data and industry insiders, Latinos are the most uninsured and underinsured group in the nation. For instance, nearly one third of the more than 40 million people in the United States without health insurance are Latino, but Latinos are only 15 percent of the population. For many, it's due to tight budgets, language challenges, and cultural biases.

"If you come from a country with a national health program, you may not realize that in the United States, without proper health insurance you could find yourself with enormous medical bills," says Leonor McCall-Rodriguez, president of One Voice Insurance Services, in California.

Andre Urena, CEO of the Latin American Agents Association, says that similar cultural biases lead many Latinos to skimp on life and homeowners insurance too. "Those from cultures of strong family ties and countries with little material wealth simply don't see insurance as a priority."

But having the right insurance in the right amounts should be a financial priority, experts say. Below, find out if you need it and, if so, how much is enough.

Health Insurance
Do you need it? Ten out of 10 doctors agree: Yes. With healthcare costs soaring ever higher and many employers not paying their traditional share, underinsured households are risking financial ruin. Half of all personal bankruptcies are due to medical bills.

How much is enough? "You don't just need a health insurance plan; it has to be a quality plan," says McCall-Rodriguez, who reports that policies of questionable value are flooding the market, advertised everywhere. "You want a major carrier," she says. "And you want to ensure that all serious procedures are covered."

Ask enough questions. Research deductibles and copayments. (Don't know what those terms mean? See the web link "Choosing a Medigap Policy," below.) Find out which drugs are covered. Inquire about emergency care coverage. Ask your current doctors if they participate in the plan.

Tips: "You also need to know how to use the plan," adds McCall-Rodriguez. Preventive care, such as colonoscopies and vaccinations, are covered 100 percent by many plans. Checkups can be covered even before deductibles are met.

If you're 65 or about to turn 65, you may want to buy Medigap insurance to supplement Medicare. The "Choosing a Medigap Policy" publication is available online. You can also call Medicare and speak to a counselor at 800-633-4227.

Homeowners Insurance
Do you need it? If you own a home, yes. A home—even after the recent market woes—makes up such a large percentage of most families' net worth that not insuring it and its contents is a big mistake.

How much is enough? You probably already have homeowners insurance—getting a mortgage without it is generally impossible—but you may be underinsured. "Many homeowners buy a policy and then let it renew year after year. Meanwhile, their home value may have appreciated greatly," says agent Andre Urena.

"Your home should be insured for an amount somewhere between what it would cost to build a new, similar home—its 'replacement cost'—and the current market value of your property," Urena says.

You also need to assess your valuables. They might not be covered unless your insurance company knows about them, says Cathy Pareto, CFP, president of Cathy Pareto & Associates, a financial planning firm in Coral Gables, Florida.

Tips: Photograph or videotape the inside of your home, cataloging possessions. Keep documentation in a safe place. If a fire destroys your home or you are robbed, you'll need that proof to collect on insurance. Receipts also help. When shopping for policies, get several quotes. And be aware that a typical homeowners policy does not cover damage caused by floods, earthquakes, water-line breaks, termites, or mold, which require additional insurance.

Auto Insurance
Do you need it? You bet. Turn your steering wheel the wrong way and you may be liable for all sorts of damages.

How much is enough? Each state sets a minimum, but that typically isn't enough. In California, for example, the minimum is 15/30/5, meaning that your carrier would pay $15,000 for bodily injury to a single person, $30,000 for injury to all people involved, and $5,000 for property damage.

Tips: Consider exceeding the minimum—by how much will depend on your state's minimums, your personal assets, and how much you have to protect. Auto insurance companies reward older people with clean driving records. These drivers can get the best rates because they're experienced, often own safer cars, and—if retired—tend to drive less, says Urena.

If you've had the same auto insurance for a number of years, it may be time for a cost comparison to see if you're getting the best deal. If you take AARP's Driver Safety Program, you may receive an additional discount. Go to www.aarp.org/families/driver_safety or call 800-227-7669.

Final note: Always consult with a professional when considering insurance. In addition, you can check the financial health of an insurance company by contacting your state insurance department or by using the financial information tools on the National Association of Insurance Commissioners (NAIC) website.

Learn more! Read about umbrella, life, renters, long-term care, and specialty health insurance coverage in the second part of this article.

These links are provided for informational purposes only. AARP does not endorse, and has no control over, or responsibility for, the linked sites or the content, advertisements, materials, products, or services available on or throughout these sites.

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