It was a situation many of you have experienced before: an officer is on a routine call in one of the more active areas of the city. He asks for back up; a few minutes later, a radio keys up. There’s yelling and screaming in the background, maybe the sounds of a struggle, and an officer giving the code for, “officer needs assistance.” Tones go off and it beings to “rain police” in that part of town; the cavalry is on the way.
I have noticed a natural tendency for arriving officers to set up a perimeter around the officers calling for help and the arrested individuals, protecting them from the remainder of the crowd. The assisting officers don’t have to be instructed where to stand, or whom to watch…they know it. They are there to provide cover and protection should something bad happen.
Police officers naturally know how to cover each other, but do we know how to do the same thing with our personal life and finances?
Financial coverage in case “something bad happens” is provided through insurance. Insurance is a simple system, perfected through complicated math. The notion is that the insurance company gathers money from a large number of people, promising to pay a small number of people in case of a covered loss or catastrophe. The amount each person pays is normally determined by the risk they pose to making a claim, which is where the complicated math comes in. For example, with auto insurance, an 18-year old man is going to pay significantly more than a 62-year old woman driving the same car because the young man is much more likely to have a collision, and therefore make a claim.
You probably have health insurance through work, and the idea is the same. You and your employer pay into the insurance pool. This covers plenty of expected costs, such as immunizations for your kids. It is also calculated to pay for a few unexpected costs, such as cancer treatments for a co-worker. The goal of insurance is to allow you to budget your costs. If your 18-year old son totals your new car, you do not have to pay $25,000 to replace the car. Similarly, if one of your covered family members has a serious illness, you will not be liable for the tens, or hundreds, of thousands of dollars worth of medical care.
Types of Insurance
You can buy insurance for anything: Jimmy Durante insured his nose, considering it his trademark; several years ago, a Dutchman insured his nose for about $6 million; Dolly Parton insured her chest. There is some insurance worth having, and some insurance that is more profit for the insurance company than it is security for you. So, here is one cop’s advice on the insurance you should consider or avoid:
Life: If you have a spouse and/or children, this is probably a “must.” Most experts recommend five to ten times your salary. This will allow your spouse to pay off any debts, including the mortgage, plus live a few years without working. The younger your children, the more coverage you need to account for daycare or permitting your spouse to stay home full-time.
Auto: This is mandatory in most, if not all, states. You will want medical and liability coverage should you be at fault. Make sure your coverage levels are realistic. If you total a new Cadillac, that driver is going to want $50,000 or so to get a new one. Some states may offer uninsured/underinsured motorist coverage, which will help cover your losses if the other driver is at fault. Remember most states have a minimum coverage requirement that will not replace a new car. You can also add towing insurance, travel insurance (if you are stranded 100 miles from home), and the like. You can reduce your costs by increasing your deductibles. If one of your cars is a “beater,” you may consider dropping coverage for damage to it, and just keeping insurance for damage or injuries caused to others.
Homeowner’s or Renter’s: Your mortgage company will require you to have insurance on the house. Make sure the coverage is enough to rebuild what you have. Policies can include supplements for unattached garages, or code upgrades. If you have a collection of any sort (baseball cards, jewelry, etc.) that is very valuable, you will need an additional rider for that. Renter’s insurance covers just your belongings, not the building, in case your apartment building catches fire (or suffers another catastrophe). Depending on where you live, flood, earthquake or hurricane insurance may be required or desirable (most insurance policies will not cover losses from these unless you pay for the specific rider).
Health: As a police officer, you most likely can get this through work. If you are very healthy, as is the rest of your family, consider getting a high-deductible medical insurance to reduce your premiums. You will pay more for a doctor visit, but you could save several hundred dollars a month in premiums.
Disability: This is not coverage for an injury at work, but instead coverage for an accident in your free time. If you fall from a ladder while cleaning the gutters at home, and are unable to work for six weeks, disability insurance can help pay the bills until you are back in uniform. Unless you have a very comfortable “emergency fund,” you should definitely consider disability insurance.
Liability: This one is tricky. As you know, you can be sued individually for your actions professionally. If you acted in good faith, chances are your employer will cover you. Plus, the lawyer would much rather sue a city or county with “deep pockets” then a patrol officer making $50,000 a year…the payoff potential is higher. This can also supplement homeowner’s insurance, should someone get hurt on your property. If you have significant assets, or just want to be cautious, this could be worth while.
Accident: This pays you for an accident that is not covered by auto insurance or another person’s liability insurance. If you have disability insurance, chances are this is redundant.
Debt Payoff: Your mortgage company, car loan company and even your credit cards will all offer insurance to pay off your loan (or make payments on your loan) should you lose your job, get injured or die. These are probably the least desirable insurances, especially if you have adequate life and disability insurance.
As police officers, we are quite good at covering each other at work emergencies. But sometimes, we get so wrapped up in daily life and work routines, we forget about covering ourselves and our families against financial emergencies. Look at your family and personal needs, and make sure you have the proper insurance to cover yourselves against financial disaster.
Because when it comes to your personal finances, there is no code for, “officer needs assistance.”
About The Author:
Jonathan Bastian is a police officer in Lexington, Kentucky. He is a noted author on thermal imaging technology, but has a passion for personal finance and helping people spend money wisely. He has a bachelor’s degree in business economics and international relations (commerce emphasis), and paid for several Spring Break trips by “buying low and selling high.” He is still a cop by trade, so his suggestions and comments are not intended as formal tax, financial or accounting advice. Consult paid professionals if you need formal guidance.