To Insure or Not to Insure?

By Leigh Guth, N.C. Cooperative Extension Agent

That is the question most everyone is asked when they buy a new phone, computer or any electronic gadget these days.  Usually it is at the checkout counter with little time to ponder the pros and cons.  There are five people in line behind you, or you have a 7-year old with you.  It doesn’t sound expensive, and you would hate to have this new coveted gadget broken by said 7-year old, so, you sign on the dotted line.

There are several basic concepts when it comes to insurance, a financial tool to guarantee against risk of loss or harm.  As a consumer, you have five choices.

  1. Cross your fingers and do nothing more.
  2. Avoid loss by avoiding risky behaviors or dangerous locations.  Examples would be not taking your electronics to the swimming pool, not smoking, or giving up sky diving.
  3. Reduce your chance of loss by taking certain actions like wearing safety gear, keeping your computer in a protective case, or using a smoke detector at home.
  4. Accept risk knowing that you can afford to pay for the loss. The most common example is an insurance deductible.  You agree to pay the $500 deductible because you can afford that amount, and it will lower your annual insurance cost.
  5. Transfer the risk by purchasing insurance.

Keep in mind the large-loss principle when choosing what to insure.  Purchase insurance with the extent of the loss in mind and not the likelihood of loss.  For example, you have lost or damaged several cell phones in the past; the potential of harm or loss is high for subsequent phones.  However, the cost to replace a phone is $200.  This is not a large loss; therefore, do not purchase insurance but reduce your risk or accept the risk.   Take the $7 monthly insurance fee and put that into an emergency fund to help pay for the phone if it is lost or damaged.

Let’s apply this concept to disability insurance.  The likelihood that you will have an illness or injury that keeps you from working may be low.  However, if individuals depend on you for income or for caregiving, what would happen to them if you were no longer able to function in that capacity? How much income would they need to replace your lost wages?  Replacing just $1,200 a month for 18 years would amount to $259,200 in lost income.  This is a substantial amount and justifies insurance based on the large-loss principle.

Make sure that you do not purchase insurance that duplicates other coverage. For example, do not purchase insurance when renting a car.  Check with your current auto insurance; you are probably already covered or can add a rider for less than the policy at the rental counter.

Based on the concepts of large-loss and non-duplication, most people need health/medical; disability; life; property, and auto.

What insurance-related questions do you hear most often?

Resources:

http://www.extension.org/pages/16131/meeting-your-insurance-needs

 

Saving Money on Summer Expenses

By Sarah Mammarella,  Family Resource Management N.C. Cooperative Extension Agent

Summer is a great time to start saving money. Whether it is to beef up your savings account or stow money away for a special trip event or annual holiday expenses, saving money feels good. In order to save money we need to look at what summer expenses we can reduce.

Perhaps the most obvious place to start during the hot summer months is with our electric bill. There are many different things that we can become more mindful about in our home that will help reduce our electric bill. Here are a few tips that help me save money on my electric bill every month:

  • Shut off all lights and TVs in rooms that are unoccupied: This may seem like a no-brainer but this wasted energy use happens much more than you’d think.
  • Turn your thermostat up in the summer when you are not home: There is no need to cool an empty home; I normally set mine to 79°. While you are at home, try keeping the thermostat between 76° and 78°, and using ceiling fans to keep cool. Remember to turn fans off in rooms that are unoccupied; their benefit is lost if you’re not underneath or near the fan.

  • Don’t bother turning a thermostat down from 80° to 62° with the intention of cooling your home more quickly; this will only cause your heat pump to overwork and will not bring on cooler temperatures any quicker.
  • Check the efficiency of your refrigerator and ensue the temperature of the fridge portion is between 37° and 40° and the freezer is between 0° and 5° to maintain food safety.
  • Unplug anything that is pulling energy when you are not using it: Items such as cell phone chargers and laptops are constantly pulling energy when plugged in. You can save a lot of money just by unplugging these items.
  • Use a power strip with an on/off switch for your television, DVD player, and other home entertainment items, and turn the switch off to the power strip when not in use: Much like the chargers, these items can still draw energy while not in use.
  • Don’t forget to unplug televisions, lamps or alarm clocks that seldom get used in guest rooms.
  • Weatherproof your home: Seal cracks around doors and windows where cool air may be escaping. You can do this with weather stripping or in some instances, caulk.
  • Insulated drapes can help keep cold out during the winter and heat out during the summer. These can lower heating and cooling costs.
  • Make sure that you change your central air filter every month: This can help your central air run more efficiently and even increase the life of the unit.

Another summer savings opportunity is on food and convenience items. By being mindful of how and when we shop, we can possibly save hundreds every month. Here are a few tips that help me save money on food every month:

  • Collect coupons: You can do this either by buying the Sunday paper and clipping them or going to various websites to print them off of the Internet.
  • Match your coupons to the sale items: Look through sale fliers of your most frequented grocery and drug stores and match your coupons to the sale items so you are getting the best price possible.
  • Find out when your grocery store is doing a double or triple coupon day: Most grocery stores will have specific days or weeks that they will double or triple your coupons. This may lead to getting many items completely free.
  • Only buy sale or clearance items that you know you will use. Buying on sale is no bargain is you never use it. This can happen when buying clothes with the intention of losing weight or purchasing a kitchen gadget that you simply don’t have time to use.
  • Buy in bulk: Even if you live by yourself, you can save money by buying certain foods in bulk and freezing individual portions in freezer bags.

Although I believe that electricity and food are the easiest places to start, I do other small things to try to leave me more money in my pocket every month. A few extra tips to save include:

  • Reduce drive time: Gas is expensive; so don’t make unnecessary trips. Car-pooling is always a great idea.
  • Enjoy outdoor activities: Instead of paying to go enjoy your summer, try getting outside and taking advantage of free activities such as swimming, hiking and tennis. Here is a list of ideas for cheap summer fun for military families.
  • Get your clothes at second-hand stores: I rarely buy new clothes. Although it may take some time, you can find used clothes that are in great shape at local Goodwill and consignment shops.

Saving money can be satisfying because it means that we are attaining goals that we have set for ourselves. Recognizing that there is excess money being spent on such things as electric and groceries can empower us to reduce our spending by using common sense and mindfulness.

What are your favorite money-saving strategies?

Resources:
KeepingCoolrev

http://www.extension.org/pages/25638/low-cost-and-no-cost-actions-to-save-home-energy-and-money

http://www.extension.org/pages/25623/selecting-energy-efficient-home-refrigerators-and-freezers