Insurance advice for grandchildren with young families of their own

When grandchildren begin their financial life, good advice about their personal insurance selections can save them a fortune and perhaps spare them a ton of heartache. The foundation of a young family’s personal insurance plan consists of life insurance, disability insurance and medical/health insurance. 

Life insurance

When starting a family, the key question is, “How much life insurance do I need?” With today’s high cost of raising a family, the face amount of a life insurance policy probably needs to be at least $500,000 to $750,000.

Term life insurance, guaranteeing coverage for 20 or 30 years, has a less expensive premium than “permanent” coverage. Whole life insurance and its cousins of Universal life and Variable life have lapse rates as high as 90 percent after 10 years. Young families, faced with so many financial pressures, often drop these policies and lose all or most of what they paid in. This high lapse rate on “permanent” policies generates high profits for life insurance companies.

In one’s late forties, fifties or sixties, a case can be made for owning some permanent life insurance. The policy can serve a variety of needs, including the financial protection of a surviving spouse or paying for final expenses.

Disability insurance

When your grandchild lets someone talk them into buying a permanent life insurance policy, it often consumes so much of the family insurance budget that money cannot be found for owning disability insurance. A person is eight (8) times more likely to suffer a disability lasting longer than 90 days than he or she is likely to die. Disability insurance keeps money flowing into the household if one is injured or ill and cannot work for an extended period of time.

Disability causes more than 50 percent of home foreclosures in the United States.

The fine print language matters most in disability insurance. A policy needs to protect one’s own occupation, not the ability to work just anywhere. Known as “own occupation” policies, they pay if one cannot perform the basic duties of his or her occupation. By comparing top companies, an independent health insurance broker can assist in finding the disability insurance policy that fits best given one’s occupation and needs.

Health/Medical insurance

A Health Savings Account (HSA) qualified medical policy provides lower premiums and powerful tax benefits. An insurance company provides the high deductible health plan; while one’s financial institution of choice provides the HSA account. Wells Fargo, for example, shines as a leading provider of HSA accounts. Unlike “Flexible Spending Accounts” in an employer-based medical plan, money not spent each year from the HSA account rolls over to the next year. You do not lose what you do not use. One receives a tax deduction the moment a deposit is made to the account, and one can use it for medical and dental expenses incurred until satisfying the deductible.

HSA Approved Expenses for 2011 | A little known method that can ...

I feel your pain. I to pay A LOT for health insurance. Yet, I haven’t gone to the doctor in two years.

I’m not saying this to brag about my health (Actually, with free preventative care , it’s pretty careless to not get a physical once a year). This behavior, of not using your health insurance, is fairly typical of people in their 20’s.

There is one advantage to being in this situation, besides the obvious — depending on your coverage; you may be eligible to open a Health Savings Account (aka HSA).

I’m amazed at how many taxpayers qualify to contribute to a Health Savings Account but don’t. There are many benefits for doing so.

The purpose of this post is to give a brief introduction to Health Savings Account, followed by a list of HSA allowable expenses in 2011

A HSA is a unique savings account, used along with a high deductible health plan. A HSA is similar to a Traditional IRA. Contributions to a HSA are tax-deductible and withdrawals are tax-free, as long as the withdrawal is used for a HSA approved expenses.

To contribute to a HSA, you’re required to have a high deductible health plan.

In 2011 the contribution limits, minimums, and maximums for opening an account are:

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