Insurance Checkup: Coverage for bride-to-be?
Michelle, 26, is getting ready to take that walk down the aisle and wants to be sure that she and her husband-to-be not only have a blissful wedding day but also have the perfect insurance plan.
How can she avoid knotty insurance issues after joining in matrimony?
- Combine cars under one auto policy
- Consider additional coverage for valuables
- Pop open an umbrella policy
- Be strategic with life insurance
- Keep health insurance separate
Michelle, 26, lives in South Florida, works in online media and is engaged. She drives a 2004 Toyota and hopes to replace it within three years. She has health insurance through work and also carries the minimal life and disability insurance offered there. She lives in a rental apartment on a major waterway in a coastal area, has renters insurance and plans to buy some flood insurance.
Amid all the wedding planning, this bride-to-be wants an insurance plan. How does she get hitched to the right coverage for her car and other belongings? Should she consider supplementing her disability insurance? Should a couple say “We do” to combining health insurance under one employer, or to keep plans separate?
Checkup, diagnosis and prescriptions
By combining cars under one auto policy, you can eliminate one of the biggest gaps for couples: inconsistent liability limits. The husband-to-be, for example, might be carrying $100,000 worth of coverage for injuries caused by him in a car accident. The wife-to-be might be carrying $300,000 in coverage. When they ride together in her car, they have $300,000 worth of protection, but they lose $200,000 in coverage when they ride in his car. This is why consistent liability limits are an important part of a good insurance program.
Be sure your auto insurance names you both on the policy’s coverage page. Even after you’re married, a spouse who’s not named can lose some coverage under certain circumstances.
Here again, watch your liability limit. Most renters insurance automatically comes with $100,000 in liability coverage. Raising it to $500,000 is very economical, costing only about $20 a year! One of the things personal liability coverage covers is liability at the wedding reception, for example.
Your renters insurance would cover theft of any wedding gifts at your reception. But don’t forget to buy extra insurance for valuables, such as the engagement ring. Renters insurance excludes or limits coverage on a lot of valuable property.
One policy you don’t have in your portfolio is an umbrella policy, which would have three advantages:
- Extra liability coverage when your automobile or renters insurance limits are exceeded by a major lawsuit.
- Coverage for defense costs in such lawsuits.
- Coverage for legal issues beyond your car or renters insurance. An example would be if you rent a boat while on your honeymoon and then injure someone with it.
Umbrella policies are sold in million-dollar increments. The best part is the low price: $1 million worth of coverage for about $200 a year.
Having disability insurance coverage through work is good because the expense of a long-term disability could ruin you. But because your employer pays for the insurance, any benefits you receive will be subject to income tax. And most disability policies provided by an employer pay only 60 percent of your income, which is pretty lean. After taxes, you might net just 45 percent of your income. You might want to have the premiums added to your W-2 at year-end, so you can receive the benefits tax-free.
At your age, resist the temptation to buy a lot of life insurance just because it’s the responsible thing to do. When a young person wants life insurance because of a student loan or other major financial obligation, it’s best to stick with term insurance, which provides a lot more bang for the buck.
As long as you each have health insurance through your individual employers, it’s generally most cost-effective to keep your policies separate. If either of you loses your job for whatever reason, you can be added at that time to your spouse’s group health insurance with no gap in coverage.
I hope that this helps with your insurance planning. If you have to cut costs, raise your deductibles on car, home and health insurance. Learn more about your insurance options here on Bankrate. And have a great wedding!
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