Money, Insurance - Marine Corps Times

Can you master disaster?

Imagine a disaster like Hurricane Katrina. Now figure out all the ways something like that could affect you. Your home; your car; even your life -- all could be in harm's way.

Disasters are sudden and unexpected -- you're never completely prepared for them. But you can plan ahead.

In all, 2005 was an agonizing reminder of how important it is to take the time to plan. The 2005 total of homeowner insurance claims in Louisiana was more than the combined total of premiums paid and insurance company profits in the state over the last 25 years, according to the Insurance Information Institute.

Devastation like Katrina may force you to readdress your insurance needs and how well you could survive a catastrophe. And that means evaluating your mix of policies to ensure you'll be covered no matter what.

Life

Your single most important asset -- your life -- is now valued even more by the military. As of Sept. 1, 2005, all service members are able to purchase a maximum $400,000 of coverage through Servicemembers' Group Life Insurance for $26 a month. Service members are automatically covered for the $400,000 on their first day of active duty, unless they decline coverage.

Service members can be insured for lesser amounts. Coverage begins at $50,000 for a monthly premium of $3.25, and is sold in increments of $50,000 up to the $400,000 maximum. The active force and members of the reserves are eligible for SGLI coverage. Reservists who are not assigned to a unit or scheduled for drilling qualify for part-time SGLI coverage for the time they are called to active duty, according to the Department of Veterans Affairs.

Is $400,000 in SGLI coverage enough for you?

If you're married and/or have children, you should assess how much of your salary and earning potential will need to be replaced. If your spouse doesn't work, his or her ability to replace your income may be limited upon entering the labor force. Also, families with unique circumstances, such as a special needs child or dependent parents, may need extra coverage.

Insurance advisers recommend buying enough life insurance to equal seven to 10 times your annual income. For example, an E-6 making $49,800 should have roughly $350,000 to $500,000 in coverage. An O-3 earning $71,200 should have roughly $500,000 to $700,000 in coverage. If your circumstances warrant increased life insurance, you may want a private supplemental policy.

When shopping for a commercial policy, people who are still in the military should watch out for a "war clause," which would not cover death in combat.

For those contemplating separation from military service, life insurance benefits for veterans also have increased. Service members who separated after Aug. 31, 2005, with SGLI coverage greater than $250,000 can now apply for Veterans' Group Life Insurance at the higher level, to a maximum of $400,000. However, the drawback to VGLI is its expense. VGLI is designed to cover all veterans, regardless of their health. Rates are high and priced to pay for all claims from this high health risk group. If you're not high-risk, you can probably get more competitive rates from a commercial issuer.

Many insurers offer military discounts, and many associations provide life insurance benefits specifically for service members and their families. Associations include the Army and Air Force Mutual Aid Association, the Armed Forces Benefit Association, the Armed Services Mutual Benefit Association, the Military Benefit Association, the Military Officers Association of America, the Navy Mutual Aid Association, USAA and the Uniformed Services Benefit Association.

For example, USAA provides term life coverage of $250,000 for a competitively low rate of about $15 a month (in all states but New York, where the coverage amount is $100,000).

ASMBA was formed in 1963 when a group of pilots shipping out to Vietnam found they were denied life insurance because of a war clause. ASMBA offers free membership to active-duty, inactive reserve and veteran service members, and includes free accidental death and dismemberment coverage of $3,000.

Be careful if buying a company's variable and universal life policies, sometimes marketed to service members who don't need them -- usually junior enlisted people. The policies typically combine life insurance with an invested cash component for savings that can supplement retirement funds. They also offer flexibility for lifetime coverage. For instance, death protection amounts can be adjusted as a person's financial obligations increase or decrease over the years.

However, according to the Government Accountability Office, many of these policies are sold to unmarried people with no dependents and little need for coverage beyond what the military provides.

Before you buy additional insurance, consider who would be financially hurt by the loss of your income. A sole-income provider with young children likely needs extra coverage. For single people with no children, parents or anyone else relying on their income, $400,000 in SGLI coverage probably is sufficient.

Home

When it comes to water damage from natural disasters, insurance policies get a little murky. That's because you can only purchase flood damage insurance through the federal Flood Insurance Program. The typical homeowner's policy will cover natural-disaster damage only from wind, wind-driven rain, fire and trees to your home, shed or garage.

With hurricanes, damage can be caused by rain or flooding. Typically, rain enters your house through damaged windows, doors, walls or the roof and causes puddles or standing water. Policies generally cover this damage.

By contrast, flood damage usually leaves a watermark.

Homeowner's deductibles for hurricanes are often more expensive than for other types of claims, or even a percentage of the insured value of the home.

If you live in a condominium, your coverage is split between your policy and that purchased by the condo board. Typically, your complex will have a "master policy" that covers common areas such as the roof, basement, elevators, boilers and walkways. This policy normally covers the basics of your individual structure, such as the walls, floor and ceiling.

A condominium insurance policy will cover your personal possessions and built-in features such as kitchen cabinets and appliances, plumbing, wiring and bathroom fixtures. Your policy also should cover liability, such as water damage to the residence below. You'll also need separate flood insurance policy if you're in a flood zone.

Car

To save money, many people buy only liability insurance, especially for older cars. This coverage is required by law, and pays for damage your car causes. But after a natural disaster, comprehensive coverage is what you'll need to get back on the road. Damage from wind, hail, trees and even flooding is covered by comprehensive coverage, as is vandalism and theft. Homeowner's and renter's policies should cover items stolen from your car.

Retirement

As time goes by, the need for long-term care is real. Be prepared.

There is no national long-term care program in the U.S. for seniors who suffer from debilitating physical and cognitive diseases. Medicare covers only the cost of short-term nursing home care.

Military health care benefits don't cover long-term care. The government offers long-term care insurance as an optional benefit for a fee, or you may buy a policy from a commercial provider.

For the best rate, buy coverage when you're relatively young and in good health -- about 55.