Prepare for the Unexpected: Insurance Matters

At least one thing in life is certain—accidents happen. Unfortunately, too many Latinos are unprepared for the unexpected due to lack of insurance, a simple safety net that can prevent financial ruin.

Marta Sastra, a representative for Aflac Worldwide, tells the story of a family who traveled to Disney World. Their vacation was a dream come true until an unexpected car accident on their way home landed the father in the hospital with serious injuries. The mother and child had to stay in a hotel until the father was well enough to be released and to make the trip home. Then, neither was able to go back to work immediately. Physical recovery was one thing, but financial recovery could have been disastrous. Between the hospital bills, the hotel expenses and loss of income for nearly two months, the family could have faced an insurmountable amount of debt. Fortunately, the family’s health and accident insurance policies kicked in, and they continued to pay for mortgage, utility and grocery bills. “Their insurance was their survival,” says Sastra, who often hears similar stories from her clients. “Having insurance is about protecting the quality of life and preparing for catastrophic accidents or illnesses that could bankrupt the family,” she says.

But too few Latinos actually have access to or seek out appropriate insurance coverage. “A lot of people think they can’t afford insurance and they think that their [extended] family will be able to take care of the expenses,” says Concepción (Connie) Hernandez, an agent for New York Life Insurance Company. “But if you don’t think you can afford it, then you can’t afford not to have it.”
According to the Florida State University (FSU) report, “Trends in Marketing Insurance to Hispanics,” 33 percent of Latinos do not have health insurance, compared to only 11 percent of non-Hispanic whites, and about 45 percent of Latinos lacked auto insurance in 1997. Though health and auto are often the most commonly considered types of insurance, homeowner’s and life insurance also rank among the most necessary, but only 33 percent and 34 percent of Latinos respectively lack those policies.

“Many of us come from communities where either government takes care of it or it just isn’t an option or a priority,” Sastra says of the shortage on insurance among Latinos. According to the FSU report, “In most Latin American countries, including Mexico, insurance for major investments such as homes and cars is not obligatory. Moreover, because most Hispanics had nothing of value to insure in their home countries, they are relatively uninformed about insurance and its importance in U.S. society.”

Maria Elena Cisneros, an agent for State Farm Insurance, attributes the lack of insurance among Latinos to their unfamiliarity with the field. “I have been in the insurance business for 16 years and in all these years I have seen customers from Latina America who are educated professionals in their field that do not understand insurance,” she says. “This is the reason why it is so important that agents meet with Latinos and educate them about it.”

Other barriers, the report continues, include difficulty in translating insurance terminology as there often is no Spanish equivalent and certain cultural beliefs about life’s unpredictability and a “si Dios quiere” somewhat fatalistic attitude. Bellaria Jaramillo, CFP®, agency director and financial advisor for Meflife, says, “There tends to be more of a live-day-by-day idea instead of planning for the [long-term] future. People are more concerned about making ends meet.”

Of course, much of this applies primarily to first generation U.S. Latinos who are not as familiar with the benefits of insurance. Jaramillo says that awareness is much greater among second and third generation Latinos, who often bring the education home to their parents and children.
None of this, however, is to say that Latinos don’t care about insurance. In fact, it is quite the contrary. Because Latinos prioritize their families’ safety and success, they often show a great interest in insurance when given even a little education on it. Personally, Hernandez says, “I have insurance because I love my family.” But the topic can be confusing and intimidating.
Though people typically know about health, auto and homeowner’s insurance—the kinds that are most visible in advertising, the easiest to explain and the most mandatory—they are often unaware of the additional plans that could save them a lot of money and worry should an accident happen. Even when they may be aware of other coverage, it is often difficult to determine if and how much may be necessary.

Experts recommend the following four rules to decide whether or not to buy a certain type of coverage:
Buy insurance to protect against risks that could devastate you and your family financially.
Buy only the necessary amount of coverage, which is usually determined by your income level.
Buy insurance that fits the needs of your lifestyle. For example, you wouldn’t pay for car insurance if you don’t have a car; the same is true for all kinds of insurance.
Buy insurance for practical, not emotional, reasons.
The options in insurance are almost endless, from what kinds of plans are available, to the amounts they cover, to the conditions included in the plan, but, for simplicity’s sake, there are a few essential insurance plans that Sastra, Cisneros and other experts agree everyone should have. Here is a brief look at the top six essential insurance plans.

Auto insurance
What is it? Auto insurance protects against losses related to operating a vehicle.

What does it cover? Liability insurance typically covers damage the insured causes to another person’s property as the result of an accident. Collision coverage is optional and covers damage done to the insured’s property as the result of an accident. Comprehensive coverage includes damage caused by non-accident related incidents, such as theft, vandalism or weather.

Why do I need it? Liability insurance is required by law for vehicle owners and can prevent debt due to another person, such as paying for someone else’s hospital bills or car repairs. Collision and comprehensive insurance can greatly reduce the out-of-pocket fees for vehicle repairs or replacement if an accident occurs. It could mean the difference between a few hundred dollars and several thousand dollars.

Homeowners insurance
What is it? Homeowners insurance protects against financial loss due to disasters. It includes property damage and liability or legal responsibility for injuries and property damage caused to other people on your property as well as pet-related damage.

What does it cover? Policies commonly cover the structure of the home (in case it is damaged by fire, lightning, hurricane or other disasters in the policy); personal belongings inside the home up to a specified amount; liability protection (in case someone is injured in your home, their property is damaged while on your property or your family pet damages someone else’s property) and related court expenses; and additional living expenses (in case the home is temporarily uninhabitable due to fire or other insured disaster).

Why do I need it? Most lenders require homeowners insurance before financing the mortgage. In addition, homeowners insurance protects the investment in your home. Basically, if you can’t afford to buy a new home and replace all of your belongings tomorrow if something happened to you today, you should have at least the minimum amount of insurance.

Also keep in mind that basic homeowners policies don’t cover floods and earthquakes, so people who live in flood-or earthquake-prone areas should purchase additional coverage for these disasters.
Those who rent an apartment, home or condo rather than own a home should also consider purchasing renters insurance. For a few dollars a month (in most cases), you can guarantee that your personal belongings will be replaced if something happens to the property you live in.
“Your home is your biggest investment and the one closest to your heart!” Cisneros says. “It is everything you have worked for so hard and you need to make sure it is protected against anything that might damage it.”

Health insurance
What is it? Health or medical insurance commonly helps cover expenses of preventive care, doctor or hospital visits and emergency care.

What does it cover? A wide variety of plans exist to fit almost any budget and risk level. More comprehensive plans come with higher monthly payments and include check-ups, regular doctor visits, prescriptions and hospitalization or emergency care with lower out-of-pocket expenses. Some come with lower monthly payments and only cover major emergencies or illnesses, which can be the most expensive, with higher out-of-pocket expenses.

Many employers offer some coverage to employees at little or no cost. Latinos, however, are often in situations where employers do not offer insurance or they don’t have access to it because of citizenship status or they are self-employed and don’t think they are eligible for health insurance. “Entrepreneurs and small businesses can secure health insurance,” Sastra assures. “You don’t have to be Coca Cola to provide for your employees,” she adds.

Why do I need it? The most important thing is to have some sort of coverage for you and your dependents. Even a simple illness or accident can financially ruin a family with medical expenses. “If your child gets sick,” Sastra says, “It is emotionally devastating enough, and you want the best care without the added burden of worrying about how you will pay for it down the line.” Even if a comprehensive plan is unaffordable, choose an option with a higher deductible that fits within the monthly budget. When it comes to paying the deductible, “the hospital can negotiate with you,” Sastra says. “The mortgage company won’t. The electric company won’t. You have to pay those bills every month.”

Disability insurance
What is it? Disability insurance provides an income when the insured cannot work due to an accident or illness, which often includes pregnancy or mental anguish.

What does it cover? If the insured person becomes ill or injured and can no longer work in his or her own profession, disability insurance will replace that person’s income. Different types of disability insurance replace varying amounts of the income.

Why do I need it? A person has a higher chance of being disabled between ages 18 and 65 (workforce ages) than of winning the lottery. “Latinos are especially good candidates for disability insurance because families usually consist of one primary breadwinner, even if both parents work, and have more than one child,” Jaramillo says. The question to ask is where would the money for your family’s livelihood come from if the head of the household was suddenly unable to work?

Long-term care insurance
What is it? Long-term care insurance covers expenses related to assistance with the activities of daily living, such as eating, bathing and dressing.

What does it cover? The name “long-term” care can be misleading and often leads people to think of nursing homes. Long-term care can, in fact, cover expenses for any period of time, long or short, in which a person needs assistance. The care can be in a nursing home, assisted living center, adult day care or even at home.

Why do I need it? Because people are living longer and waiting longer to have children, many working adults are faced with caring for both children at home and an elderly parent. Labeled the “Sandwich Generation,” these people can face a great financial burden. With the help of a long-term care plan they purchase for their parents, they can receive financial assistance with the cost of caring for their seniors.

Among Latinos, even the topic of long-term care can be taboo because customarily the younger generation cares and provides for the older. “Just mentioning it can be offensive. ‘You would actually put me in a nursing home…,’ parents say, but it doesn’t mean your children won’t care for you,” Jaramillo explains. “It just eases the burden.”

Life insurance
What is it? Life insurance replaces income and covers final expenses or debts when the insured dies so his or her dependents or loved ones will not suffer financially.

What does it cover? The two main kinds of life insurance include term and permanent (or whole). Term life insurance generally provides benefits if the holder dies within a certain time period specified in the policy. Permanent life insurance pays no matter when the insured person dies. It also builds cash value, which is a personal asset and can be used as collateral for securing a loan. “Most believe that life insurance is only a death benefit,” says Monica Uribe, LUTCF, a financial services professional for New York Life Insurance Company. “They are surprised to learn that most permanent life insurance policies can be used while they are living.”

Why do I need it? Although it can be an uncomfortable topic to discuss, everyone is going to die at some point. Life insurance is meant to provide an income not yet earned for survivors, Jaramillo explains. “It is not meant to make anyone rich. Some people think, ‘My family will become rich at my expense,’ but that’s not what it’s there for,” she adds. The recommended amount of life insurance is calculated based on one’s income or specific debt. That way, any family members who are dependent on the policyholder’s income won’t be left without resources.

There are, of course, many other types of insurance—business, traveler’s, accident, pet, identity theft, wedding, you name it. But not all types are the right fit for all people. The key is to protect income, assets and quality of life. To learn more, Jaramillo recommends contacting the large, well-established companies. They are most likely to be trust-worthy, to offer the widest range of insurance products and to have bilingual materials and agents.

“The most important message is ‘don’t wait,’” Uribe says. “Don’t wait a minute longer, a day longer or a week longer. Today is the day to start a solid foundation for your family through life insurance. Today is the day to begin planning all the dreams you have for your loved ones and ensuring that they will be realized.”

By Diana A. Terry-Azios