Life Stages in Insurance Terms

by Apr 30, 2015

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Insurance needs evolve as net-worth grows, making it critical to revisit your coverage regularly to ensure that your assets are properly protected. The Shepard Insurance Group can keep you bullet proof as you grow by creating a blue print for your needs and then revisiting the plan regularly to add and adjust according to your personal growth. But there are some basic, age-based generalities that can set you on the right track toward comprehensive coverage. The basic playbook we will lay out here is broken into three segments:

  1. The Primary years: <30 thru age 40
  2. The Growth years: age 40-55
  3. The Empty Nest age: 55 – >65
Life Stages in Insurance Terms - Shepard Insurance Group
The primary years – 30-40 year olds

The insurance landscape is new to this age group, as are a lot of life experiences like marriage and home ownership. Here are some things to consider:

Property insurance – What you own determines what you should consider in insurance. If you have a lot of value in your personal property such as jewelry, then you should consider property insurance regardless of whether you rent or own your living space. Though insurance is something you can purchase online at a relatively inexpensive rate, the guidance and personal connection you get from meeting and creating a policy with an insurance agent is worth it. Personalized service is all it is cracked up to be, you will be able to create a policy custom designed to fit your personal needs while also setting the groundwork for a relationship that can guide you as your net worth and therefore your insurance needs grow.

Auto Insurance – This is essential, and again, getting to know your agent will serve you well in the future as your car value and coverage needs grow. When you get a policy, make sure to get no less than $500,000 of liability coverage and no less than $1,000 in your deductible. If you find you need to file a claim, always inquire as to the value of using your insurance for reimbursement. Auto coverage is a computer rated product that will be affordable if you have no tickets, no accidents, and a good credit score. But if you have an unfortunate accident the surcharges begin. Using your auto insurance for towing or roadside assistance will drive up your coverage costs and will lose you money in the end.

Liability Insurance – Homeowner policies and auto policies include liability, but if you also own a boat, a second residence, or if your career track and future income is worth providing more coverage than just the basic home and auto policies, then consider additional liability insurance. Adding an Umbrella Excess Liability policy for as little as $200 per $1,000,000 of extra coverage can be a wise choice.

Life Insurance– Getting an early start on life insurance is a very smart move. Check with your employer and explore their offering, but realize that a job change will likely leave the employer-sponsored coverage behind. There are a lot of options when it comes to life insurance, ones that can be hugely beneficial not only in coverage, but in tax benefits as well. If you have yet to develop a relationship with an insurance expert, this is the time. Find yourself a seasoned life insurance agent who has access to multiple companies. Whether providing for a spouse, children, or even dependent parents, you need to identify

  • Your need for coverage and
  • The number of years you need that coverage.

A good rule of thumb is that 25% of your coverage should be permanent coverage, written with a mutual insurance company. Also if you have children make sure you have life insurance for your spouse.

Disability Insurance – Long Term Disability Coverage is very important and very expensive, so hopefully your employer provides this so you do not have to buy it on your own. Again, the amount of coverage should match your income needs. If you need $10,000 after tax per month to meet your financial obligations, make sure you match that in after tax coverage. Coverage needs to be in place for your entire working career, typically to age 65.

And finally – and most importantly – Take the time to ask your agent or company what is not covered, where the loopholes are, or where there might be coverage limits. You must be fully informed to best prevent exposure to risk and loss.

The Growth years: age 40-55

These years are a bit more complicated when it comes to insurance needs and comprehensive coverage. Children, vacation properties, estate planning and more call for a well-organized plan ensuring ample protection. With more at stake, there is more motivation to create protection that is essentially bullet proof. If you have not already cultivated a personal relationship with an insurance expert, do so. The less you know your agent, the less they will know how to advise you and the more vulnerable your assets will be.

Property Insurance – Typically people in the age group are rooted with young families and new homes. Convenience becomes a factor as well as security, so homes feature alarms, leak sensors, and generators to protect valuables. This is when taking an inventory makes sense. Talk to your agent about how to best track what you own, it may be that you hire a professional or maybe you just use your video camera and go about filming what you have and then securing that film. But you want to do this one way or another so that in the event of a fire or some other disaster, you are not reliant on your memory to determine what was lost.

Vacation Properties – The luxury of a vacation home is costly, especially given our tendency to look for escapes situated on the water or a mountain. The coverage of second homes is complex and can have added risks and insurance requirements that you will want to know about before closing on a purchase. So talk to your agent before you buy. This can save you huge headaches and lots of money.

Auto Insurance – Just when you thought you had your car insurance all figured out your kids start driving and your premiums spike. Kids are expensive. And they are not the best drivers, making them even more expensive. Once your kids are driving, should there be an accident, do not make a claim until you have spoken with your agent. As a general rule, if claims are less that $3,000 it is not worth filing them with your insurance company as you will end up paying more with the increase in premium costs. Guard your record/history and the eventual cost of insurance until you transition you children off your insurance policy.

Recreation Vehicles – In this stage of life we tend to accumulate more toys, motorcycles, ATVs, boats etc. Make sure they are properly insured, check with your umbrella insurer about adding protection for them.

Domestic Employees – There are a couple of things to keep in mind when it comes to household staff. Make sure your staff is legal and put them on the books. For staff working over 20 hours a week, start collecting payroll taxes, and provide Workers Compensation coverage. Your home policy has an EXCLUSION for anyone eligible for Workers Compensation, and this presents a large exposure that is uninsured unless you make this legal. If you pay your help cash you cannot get Workers Compensation coverage.

Liability Insurance – You are building a balance sheet, and you have future income to protect so make this coverage generous. The addition of vacation properties and especially youthful operators makes this coverage essential.

Life Insurance – The need for Life Insurance coverage grows as your family grows, but be wise in how you structure your policies. Estate taxes both on the Federal and State level become a real source of concern, learning how to shelter benefits using an Irrevocable Life Insurance Trust makes a lot of sense. You will need an estate and trust attorney to draft and execute this trust. It is an important consideration here to not only take a short term view on using a trust to meet your needs, but building a model to get a strong understanding on implications of what issues surround continued success. A short term view when using a Life Insurance Trust will add cost and complications later. So learn and plan.

Disability Insurance – If your total income has surpassed your employer’s sponsored disability coverage, look to supplement with your own coverage. Strong growth of the investment assets on your balance sheet will begin to offset the total need for coverage.

Long Term Care – Depending on your level of success, Long Term Care coverage is something you should explore, possibly even for parents. The great majority of the population will live a long life and need some assistance near the end.

And finally – and most importantly – Talk to your agent!!! A direct line to your agent will ensure you have all you need. Call your agent for a list of exclusions and limitations on your policies.

The Empty Nest – over 55

As you wind down your commitments to children and your business, explore the opportunities available to simplify and control future cost.

Property Insurance – Save on your Property Insurance. Whether you own one or several, I recommend that you push your deductible as far as you can handle and save money in the process. Self-insuring some of the smaller pieces will also add to savings. Property insurance policies used to be fixed packages of coverage, but now you have the ability to adjust limits to your own particular needs. So find an agent who pays attention to details.

Auto Insurance – Make sure your Auto Insurance rates reflect the reduction in travel and mileage that typically comes with age, you will get lower rates as a result.

Domestic Employees – Keep it legal. Providing coverage for domestic’s, and possibly nursing care in retirement, still requires Workers Compensation coverage to shield yourself from any potential of an injury while in your employ.

Liability Insurance – Your income needed protection when you started out, and now it is your balance sheet that needs protection from risk. Make sure to implement ample coverage and to be sure all your exposures are reported to the Umbrella policy for excess coverage.

Life Insurance – Empty Nesters need to think about Estate Taxes. Now that you have grown a nice estate, the government will tax you up to 40% when you pass it onto your children/beneficiaries. Do you care? If you would like to minimize this shrinkage of your nest egg, Life Insurance is the most basic mechanism to address the estate tax exposure. You can get some relief with Residence Trust, Grantor Trust, Limited Partnerships and Corporation, but these legal bills will add another layer of cost. When you determine your retirement needs, an organized estate plan makes sense. People understand that life insurance premiums increase as you get older, so take a moment to study the value of a paid up policy on a grandchild. This is a gift of both the valuable cash build up and the long term benefits. It is a high performing choice that will be most appreciated long after your time has come.

Long Term Care – Health complicates with age, and any one of us might have a need for nursing care that is unanticipated, long term and expensive. Without a Long Term Care plan in place, such a reality can absorb large portions of an estate. LTC coverage is sensible. There are different types of LTC coverage so do a thorough review, some of the hybrids are a better choice.

And finally – and most importantly – By now you and your agent should be practically bed fellows, keep the relationship alive. Speak to your agent, know your policies exclusions and limitation. This is a period when you may have the extra time to spend with your agent in sorting out exposure. This is a vital process to keeping you and your assets bullet proof.

If you have questions email Kyle at or call 203.698.9342.

Written by: Steve Shepard

Founder/Principal, Shepard Insurance Group. At Shepard Insurance Group we begin every relationship with a face to face meeting with the client. In a comprehensive discussion of coverage needs, personal concerns, objectives and finally appetite for risk, we can arrive at the proper insurance solution. Understanding the client is the first step to accurate execution.

April 30, 2015

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