8.2a Protecting You and Your Assets 20200730(1)

QUESTIONS 1 . What responsibilities and tasks concern you the most? What do you need to learn or do to lower your anxiety and stress? 2 . What information or documents are important for your life as an independent adult? 3 . Have you or someone you know been a victim of identity theft? What happened? Could it have been pre- vented? If so, how? 4 . What human-made or natural disas- ters might occur in your area? What would you need to do to prepare? 5 . Think about the people in your life who seem to have their lives togeth- er. Do you see any patterns or tricks they use? CASE STUDY © 2020 Babson College. All rights reserved. www.babson.edu/FinancialLiteracy This case was prepared by Jennifer Bethel. It is intended for educational and illustrative purposes only. It is not, and should not be regarded as investment, tax, accounting, legal, broker/dealer or any related services advice, or as a recommendation or endorsement regarding any particular institution, investment product or course of action. No representation is being made that any product or strategy will or is likely to achieve any particular result. You should consult your advisors with respect to these issues. Neither Babson College nor the authors shall have any liability for any damages of any kind relating to this material. By accepting this material, you acknowledge, understand and accept the foregoing. Do not reproduce or distribute without the prior permission of the author. Revision date: July 30, 2020 Protecting You and Your Assets OVERVIEW THERE ARE SOME IMPORTANT STEPS THAT YOUNG ADULTS NEED TO TAKE TO PROTECT THEIR PERSONAL WELL-BEING AND ASSETS. Life as an independent adult can feel very complicated and overwhelming. How can you prepare for the challenges ahead? Let's talk about six steps you can take to simplify your adult life! 1. Standardize your identity and permanent address. Select a single identifying name to use for official purposes. This name will be used on important documents such as your driver's license, passport, voter registration, and financial accounts. Choose a version of your name and use it for all new accounts. Update existing accounts with this chosen name. As tedious and time-consuming as it might feel, doing so will save you time in the future. Choose a permanent address at which you can reliably receive mail. Until you have a stable address, you may want to use the permanent address of a trusted family member or friend. Too many important documents go miss- ing, bills are unpaid, and credit scores are wrecked because young adults change their address and fail to receive their mail. If you move, change your address online at USPS.com/move. The USPS will charge you $1.05 to verify your identity to prevent fraud. Alternatively, you can go to a post office and get a Mover's Guide packet. 2. Organize and protect your important information. Everyone has vital documents that allow them to hold jobs, access health- care, travel, and more. We need to be able to access these documents easily, but also keep them safe. Organize important documents for easy access. For paper-based documents, you may find it helpful to make and keep several copies, leaving the origi - nal in a safe place, perhaps with a trusted family member or friend. Some people set up file folders, whereas others scan their documents to create electronic files. The Appendix includes a checklist of important documents and can also be used for file-folder labels. Protect valuable electronic documents from unauthorized use. Install anti-mal- ware software to help protect your computer from computer viruses, worms, Trojan horses, spyware, scareware, and more. Turn off your computer when you aren't using it. If you have a wireless network at home, secure it with a password so others can't easily hijack it. Similarly, find a reliable product to
© 2020 Babson College. All rights reserved. www.babson.edu/FinancialLiteracy encrypt important files. Finally, you can protect your data by making hard drives unreadable before disposing of them. After you back up your data and transfer the files, shred or magnetically clean the disk. Protect your passwords. Be sure not to use personal informa- tion, such as your pet's name, real words, or favorite places. Try to create long passwords and use special characters (such as &, ^, %, $, #) and both upper- and lower-case letters. Don't use the same password for more than one account, write them down or log in while others are watching. Remember to change your passwords on important accounts every month or two and use two-factor authentication where available. One way to remember and store account numbers, usernames, and passwords securely is to use a password manager that encrypts them. Although these products typically charge a monthly or annual fee, many people find it worth it. Back up your computer files. Your computer can be stolen or malfunction. Some people protect their data by backing up files to an external hard drive and keeping the drive some - where other than where their computer resides. Others back up files to the cloud. Think about what you would wish you had done if your computer was stolen or quit working before it happens! Organize your contacts on your phone or computer. If an emer- gency happened, could you quickly and easily phone your doctor(s), dentist, health insurance company, family members, and friends? Would you be able to contact roadside assistance if your car broke down? If someone stole your wallet, would you be able to quickly call your credit card companies and bank (debit card) to cancel or freeze your accounts? The goal is to be able to contact people and institutions efficiently when necessary. 3. Complete vital documents to protect you and your family. After you turn age 18, your family no longer has the legal right to talk with your health care providers or make decisions on your behalf if you are sick or incapacitated. They will also not be able to contact companies about billing issues or other matters for you. For them to be involved, you need to give them explicit legal authority. If you decide to include them as a trusted person in the following documents, remember to let them know and give them copies of the documents. It is also essential your documents comply with the laws of the state in which you live because laws differ among states. Health Care Proxy . An important legal document that can pro- tect you is a Health Care Proxy (sometimes called a Medical or Health Care Power of Attorney or Durable Power of Attorney for Health Care). It allows you to appoint a trusted family member or friend to make health care decisions on your behalf if you are unable to make choices about your care. You may also want to set up a living will that specifies your prefer - ences for care if you have no hope of recovery and are unable to make decisions. Health Insurance Portability and Accountability Act (HIPAA). This authorization allows a family member or trusted person to ask for and receive information from your healthcare provid- ers about your health status and treatment. It is particularly important in the event you become incapacitated. Without a HIPAA authorization in place, the only way your family can get medical information about you is to have a court appoint someone as your guardian. Note that you can specify certain medical information remains undisclosed for privacy. Durable Power of Attorney (POA). Medical issues aside, you may want to authorize a trusted person to make important legal and business decisions on your behalf. Your Durable POA can be effective immediately or if you become incapacitated, depending on your preferences. If you become incapacitat- ed and don't have a durable power of attorney, your family may have to go to court and have you declared incompetent before they can take care of your finances. Will. Who would you want to receive your possessions if some- thing happened to you? Although you may not think you have many assets now and don't need a will, your financial position is likely to change over time. Besides, writing a will protects your family from having to take your "estate" (your possessions at the time of your death) through a lengthy and potentially costly court process known as probate if you die without one. 4. Protect your health and assets with insurance. Understanding the basics of insurance is critical. Most types of insurance work similarly: You pay premiums for coverage and then share costs if a loss occurs with your insurer through deductibles, co-pays, and co-insurance. § A deductible is the amount of money you must pay if a loss occurs before the insurance company begins paying. § A co-pay is a fixed amount you pay for a service resulting from a loss, usually when you receive the service. § After you pay your co-pay, you may share in the cost of the service with your insurance company (co-insurance) up to an out-of-pocket maximum. § Maximum coverage is the most your insurance company will pay. § Out-of-pocket maximum is the most you'll have to pay during a policy period (usually a year) Health Insurance. As a young adult, you will want health insurance to protect yourself financially if you need medical attention. Under current law, you can stay on a parent's plan until age 26 if they have insurance that can include you. If not, you can buy health insurance through your employer, school, union or health insurance exchange. You typically enroll in a plan either in November or when you experience a life change, such as starting college, getting a new job or getting married. You usually will have a choice of either a health maintenance organization (HMO) or a preferred provider organization
© 2020 Babson College. All rights reserved. www.babson.edu/FinancialLiteracy (PPO) plan. HMOs typically provide medical services through a prespecified network of doctors and hospitals, and enroll - ees choose providers from within the system or else pay the costs themselves (except in emergencies detailed in the plan). To see a specialist, HMOs typically require enrollees to get a referral from their primary care provider. HMOs usually have lower premiums than PPOs and require less paperwork. In contrast, a PPO allows enrollees to choose medical provid- ers from within or outside the plan's network, but they may have to pay co-insurance payments if they use outside provid- ers. PPOs typically do not require referrals to see specialists. They require little paperwork if enrollees see doctors or use hospitals within their plan's network, but require more pa- perwork if enrollees go outside of the network. PPOs typically charge higher premiums than HMOs. HMO options often offer a flexible spending account (FSA), whereas PPO options may offer a health savings account (HSA). With either type of account, an employee can contrib- ute money to an account through payroll deductions during the plan year (the contribution is taken out of the person's earnings before taxes are estimated and withheld). The person can then use the money to pay for qualified medical expenses, including co-pays, deductibles, and other medical expenses and products not covered by their health plan, in a tax-advantaged way Auto Insurance. If you own a car, you will need to purchase auto insurance to protect yourself financially. Most states require that you carry at least a minimum amount of coverage, but you may want to buy more: You can be held financially responsible if losses exceed your policy's coverage limits. Many financial advisors suggest carrying at least $50,000 in coverage for injuries to a single person and $100,000 to cover everyone hurt in an accident. Like health insurance, you will pay a premium for coverage and will share costs with your insurer if there is a loss through a deductible, co-insurance, and maximum coverage amount. Renter's Insurance. If you rent an apartment, your landlord's insurance covers the building, but not your personal property. To protect yourself from possible losses, you may want to buy renter's insurance. It typically will cover losses to your posses- sions from break-ins or damage from fire or severe weather. It usually will cover losses at your rental and away (such as on vacation or in your car) and for injuries to visitors in your apartment. It typically will not cover business pursuits or professional services and natural disasters, such as sinkholes, earthquakes, and wildfires. Other insurance. Depending on your job and age, you may also want to consider life, disability, long-term care insurance. 5. Prepare for a disaster. Millions of people encounter human-made and natural disas- ters each year, and it is crucial to prepare for them. Be sure you can readily access: § Phone and phone charger § Water and non-perishable food § Flashlights and batteries § First aid kit § Prescription medications § Pet food and water for your pet § Personal hygiene supplies § Important documents and items in a waterproof bag Copies of important documents, including driver's license, passport, birth certificate, Social Security card, wills, dura - ble power of attorney, health care proxy, etc. Debit and credit cards and cash Contact information for family members, friends, doctors, dentists, insurance companies and financial institutions An inventory of your possessions (videotaping your prop- erty and retaining receipts will help in case you need to claim a loss) So, here are a few steps that will help simplify your life as an independent young adult. Taking some time upfront to pre- pare can save you countless headaches and effort later. It will help you protect you and your assets!
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