How Much Are You Self-Insuring?

How Much Are You Self-Insuring?

Insurance

Insurance policies take away all, or a portion, of the financial responsibility of replacing assets damaged under certain circumstances. Without insurance, an individual would be financially responsible for replacing all assets lost during what could have been a covered peril or, if they don’t wish to replace them, simply living without the item and losing the initial investment made to purchase it.Even with proper insurance coverage, individuals take on a certain amount of risk themselves. This is called self-insuring and can take many forms including:A deductible: The amount of money you must pay out-of-pocket before your insurance benefits kick in is your deductible. Most insurance companies offer the insured a range of options for deductibles. High deductibles can be seductive because they help reduce your premiums, but all the deductibles you have on your various insurance policies can add up.Waiting periods: Certain types of policies, such as long term care and disability, allow an insured to select a waiting period. The waiting period is the time between the qualifying incident and the first benefit pay out. For example, if you are no longer able to complete certain activities of daily living such as bathing, dressing, and preparing food, you may qualify for long-term care nursing home benefits. If you have a 30-day waiting period on your policy, then you will not be afforded benefits until that 30 days is up. During the time of your waiting period, you must shoulder the burden of all costs associated with your carePolicy limits: Insurance policies don’t offer unlimited benefits. Policy limits are in place to outline the maximum responsibility of your insurer. For example, your health insurance policy may have a lifetime maximum payout of $5 million. Should your medical expenses exceed this amount, you would be responsible for paying that excess. It’s important to monitor the limits on all of your policies to make sure they are reasonable for the risk of damage that you face.Gaps in coverage: Sometimes the way that an insurance policy is structured can leave a gap in coverage that needs to be filled by a supplemental policy. For example, you may have home insurance coverage but without flood insurance coverage you’ve left a gap in which certain damages would not be covered. Having an experienced insurance agent review all of your policies can help you identify and plan for these gaps before you incur expensive damages.The amount of money you self-insure can be surprisingly large. Give us a call and make an appointment for insurance review and we will help you understand your self-insurance liabilities and come up with a plan to reduce them.