Tuesday, January 31, 2012

Insurance and personal planning

Insurance coverage may not seem at first blush to have much to do with family succession planning, but succession planning starts with personal planning, and personal planning includes personal risk management, which makes extensive use of insurance.

Review your automobile insurance coverage

For liability coverage, make sure that you have coverage well above the minimum limits of $20,000 per person. Coverage of $100,000 per person is a minimum for anyone who owns more than $10,000 worth of assets. Coverage of $1 million per person is better for anyone who owns a business, real estate, or other more substantial assets. The marginal difference in premium between $100,000 and $1 million is usually a negligible amount.

Make sure you have uninsured (UM) and underinsured (UIM) coverage equal to the amount of your liability coverage. Liability insurance protects the world from your mistakes. Uninsured and underinsured coverage protects you from the mistakes of others when one of those mistakes is failure to properly insure a vehicle. You should protect yourself at least as well as you protect others.

UM and UIM are not mandatory under Michigan no-fault laws. Your insurer does not have to offer it, and you do not have to buy it. You have to pay a little more for it. The amount of the additional premium is not all that high.

Your insurer does not offer uninsured and underinsured coverage, or limits it to the $20,000 / $40,000? It has that right. You have the right to seek coverage from another carrier, one that will give you the level of protection you need.

Review your homeowners / renters insurance 

If you own your home, make sure that your casualty insurance is sufficient to cover the value of your home, outbuildings, and their contents. For particularly valuable individual items, such as jewelry or works of art, ask your agent about a special floater to cover them.

If you rent, renter's insurance is an excellent idea.

Both homeowners insurance and renter's insurance offer one of the best buys available: "floating" liability insurance. You are not only covered if someone is injured on the premises you own or rent. If you are sued based on something that you did anywhere else - at a baseball game, walking down the street - you will often be covered by this insurance as well.

Review your life insurance coverage 

For protection of a spouse and young children, life insurance equal to about 10 times your annual income is essential. If you are young and healthy, a term policy paying 15-20 times your annual income can be an excellent value.

Life insurance offering investment features may be worth consideration, but term insurance to ensure that those who depend upon you for their support will be supported is essential.

Make sure you have long-term disability insurance

The disability salesmen will remind you incessantly that the risk of disability is much higher than the risk of death for those in their 30s to 50s. They may sound like they are harping, but they are right. The proper long-term disability policy, purchased in your 30s and guaranteed renewable at the same level premium until age 65, will be an amazing bargain when you are in your 50s.

Saturday, January 14, 2012

Transparency, long ago

This post from Ann Althouse's weblog, intended to make a humorous point, depicts a practice from long ago: publishing the last will and testament of a recently deceased person on the front page of the local hometown newspaper. Once filed with the probate court, it is a public record, after all.

Monday, January 2, 2012

Slight increase in exemption amounts

The per-person exemption for estate and gift taxes has gone up to $5.12 million. It reverts to $1 million per person at the end of this (election) year, if Congress does not act in the interim.

The top tax rates on taxable estates and gifts remains 35%. In 2013 it is slated to increase to 55%.