Find the right insurance to fit your financial plan


With federal benefits open season beginning Nov. 14, now is a good time to review the basic forms of insurance you should consider, and possibly use, as part of your financial plan. I’ve listed them in order of importance, for most people.

As you consider your options, ask yourself where each dollar will best be spent. Protection always sounds great — until you consider its cost and what else that money might be doing.

1. Medical. The likelihood and potential size of medical expenses make them the No. 1 financial threat to most financial plans. If you can only afford one kind of insurance, choose medical insurance.

From a financial planning perspective, medical insurance is intended to eliminate the unacceptable — unaffordable — risk from all but the most unlikely scenarios.

An unacceptable risk is one that has the potential to significantly impair or ruin your financial plan. For most of us, this means insuring against large, fairly likely expenses.

It is generally less expensive to pay for the first $500 to $1,000 of your medical expenses each year out of your own pocket than it is to pay a health insurance company to pay those bills for you. The money you save from accepting the deductibles and co-pays that you can afford can be put to better use insuring against other, larger risks.

2. Property. For most of us, the loss of homes or other structures and belongings to fire is the major threat stemming from property loss. For some, the loss of vehicles is a significant financial threat.

Again, the issue is the extent of damage to your financial plan that would follow a major loss. Fortunately, insurance against the loss of important property is usually relatively inexpensive.

Make sure that your coverage is sufficient to protect you against a major loss, and that your insurer won’t nickel and dime you when you have a loss.

3. Disability. As a federal employee covered by the Civil Service Retirement System or Federal Employees Retirement System, your protection against losing your ability to earn income as the result of disability is about as good as it can be.

Supplemental protection is often expensive and offers little real improvement. Insurers are reluctant to insure anyone for more than 60 percent of their earned income, and adding more insurance anywhere near that limit will cost you.

4. Unexpected death. If you depend on someone else’s income to pay for your living expenses, you should carry insurance on their life equal to about 20 times the after-tax income you’d need to replace if that person died unexpectedly.

You may reduce this amount by multiples of one for every year less than 20 that the income would be needed if the person died tomorrow. You may also reduce the insurance by the amount of other assets that would become available to help produce income for you as a survivor.

For example, if a vacation home could be liquidated to produce $200,000 in investable income, this can offset some of the insurance need. The best buy is guaranteed level term-life insurance with premiums guaranteed over the period the insurance will be needed.

5. Liability. I generally recommend that everyone carry at least $1 million in general liability insurance. This can usually be purchased as part of your homeowner’s or renter’s policy. The point is to make sure that you are covered against financial liability, no matter where it might originate — at home, on the street, or on someone else’s property.

6. Long-term care. The place to start your search is the Federal Long-Term Care Insurance Program when you’re in your late 50s or early 60s.

At younger ages, the risk is relatively low, and the cost of the insurance is often prohibitive. I generally like to see my clients consider this coverage when they retire and only if it is easily afforded.

While the risk is large, the cost of premiums and the risks of future rate increases and changes in benefits are high. Start with $200 per day in benefits over five years with the maximum inflation protection available, and then reduce the benefits until the premiums fit your budget.

Cut the benefit period first, then the daily benefit limit. Unless you’re 70 or older, avoid cutting the inflation protection.

7. Dental. Dental bills can be large, but dental insurance is often designed to pay very limited benefits under very limited circumstances. If you can find catastrophic dental insurance at reasonable cost, consider it. Otherwise, pass.

I’ve seen dental insurance pay a few hundred dollars worth of benefits during the year, while the policyholder paid several thousands of dollars for care. This is the opposite of what I’d expect from good insurance coverage.

8. Vision. My advice on dental insurance applies to vision insurance, as well.


About Author

Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to and view his blog at


  1. Your artle on “find the right insurance” paints a somewhat incomplete view of FERS disability retirement. You say that its about the best you can get. However, if you check the facts, its not so great.

    Please see the following OPM pamplet on FERS Disability Retirement:

    “If you are under age 62, Federal retirement law requires your disability benefits under FERS to be reduced by 100 percent of your social security benefit for any month in which you are entitled to social security disability benefits during the first 12 months of eligibility. After the first year, your disability annuity is equal to 40 percent of your high-3 average salary minus 60 percent of your social security
    benefit for any month in which you are entitled to social security disability benefits. Therefore, it is also your responsibility to document that you have applied for social security disability benefits AFTER YOU SEPARATE FROM YOUR AGENCY. Your application cannot be completely processed without this information. If you are awarded social security disability benefits at any time after you have applied for or begin receiving disability benefits, you must still notify OPM of the effective date and the amount of the social security benefits.”

    As we all know qualifying for Social Security Disability can be a long and daunting task. I doubt that anyone who has Social Security Disability and FERS disability will come anywhere close to replacing 70% of their income.

    Also, several Insurance companies do offer Federal employees Disability income insurance at reasonable rates. Aetna and SAMBA are two that I know of. I personally have a policy through AETNA that will guarntee that I have 70% of my income if I were disabled. The payments from my disability policy would be reduced by any SS benifit. Still even so I know that I was disabled that I would have 70% of my income. Also, any payments from a privately funded disability income policy are 100% TAX Free.

  2. Mike, your recommendation against dental insurance is ill-informed. GEHA Connection Dental Federal (high option) is a very good deal. The premiums for an individual policy run about $18-$19 biweekly (I think that might even be the pre-tax price). Where I live, even if one gets just two cleanings and two exams a year, one will pretty much break even. AND you can see out-of-network provders, which I always do. The cap has been raised to $5,000 a year. I’ve had this coverage for two years now. The customer service is GREAT — I’ve had the BC/BS standard (and in the past) high option for my main health care coverage forr 21 years, in several different regions of the country, and its customer service is quite poor. The GEHA representatives’ positive, helpful attitude is so refreshing. GEHA is even beginning to pay on implants and implant crowns. Please reconsider your recommendation. For people like me, with many dental issues, it is a VERY good deal.

  3. Maggie Baldwin on

    Mike, ditto what Lauren said, but apply it to vision insurance. If you wear glasses or contacts, they cost approximately $500 to $700 per year, especially if, like me, you need bi-focals. The vision insurance I pay is just a little over $6 biweekly, giving me a substantial cost savings on my glasses.

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