Customizing Policies Can Cut Down on Insurance Costs

Johari Rashad is 57 and healthy, but she thinks a lot about what kind of legacy she would like to leave her 35-year-old daughter.

Rashad owns an apartment in Southwest D.C. that she would like her daughter to inherit someday. But she knows her daughter would not be able to afford the mortgage.

That's why Rashad got life insurance -- a lot of it.

As a human resources specialist for the Environmental Protection Agency, she has a Federal Employees' Group Life Insurance policy that would cover two years worth of her salary -- about $270,000 -- at a cost of about $38 every two weeks.

She has a term life insurance policy with Mutual of Omaha worth $359,000 over 10 years that she intends to be used to pay her mortgage in the event of her death. That costs her about $75 a month.

She also has long-term insurance with MetLife that would provide her with $165 a day for care if she were to fall ill. That runs her about $1,400 a year.

On top of her insurance, Rashad has a pension and contributes to the Thrift Savings Plan, which is essentially a 401(k) for federal employees.

Rashad has a clock on her desk that tells her exactly how many days she has to her target retirement date: Jan. 3, 2017. As she enters her final years as a full-time employee, she wants to make sure she is making the right financial choices. In particular, she wonders about her insurance.

"Am I overinsured? Am I underinsured? Are these things doing the things I want them to do?" she asked.

Her main goal is to make sure her daughter can keep the condo. "I don't want her to have to worry about losing the foothold we have in terms of maintaining a presence here in Washington, which is the apartment," she said.

Frank C. Boucher, a certified financial planner at Boucher Financial Planning Services in Reston, said she should ask herself several questions.

Among them: How much help will her daughter really need in the event of Rashad's premature death? Will she be able to make half or another portion of the mortgage payments? Will she also need cash on top of the mortgage help? As morbid as it sounds, Boucher said she should remember to factor in things like burial expenses.