Insurance is much like a life jacket – it’s such a nuisance to have with you when you don’t need it, but in the event you need it, you’ll be so grateful to have it. Without insurance, you can be one car wreck, accident, illness, or house fire away from drowning in debt. Insurance is essential for you and your family’s financial well-being.
There are many different insurance types on the market, not to mention the many insurance firms offering them. While thorough coverage is vital, it’s also possible to have too much coverage. Paying too much money for insurance might leave you financially vulnerable and make you miserable paying for something you would instead allow for an emergency fund, retirement savings, or an investment.
To help you decide what kinds of insurance to avail of, here are the five types you must consider having:
1. Long-term Disability Insurance
Long-term disability insurance protects you from loss of income in case you become unable to work for an extended period of time due to illness or injury. The idea of having a long-term disability is so frightening and seems unlikely that some people choose to ignore it. Most people think and hope that “nothing bad will happen to me,” but we cannot know for sure. According to the US Social Security Administration, one in four of the 20-year-olds who will join the workforce today will become disabled before reaching age 67.
The odds are too high for you to skimp on it. If you’re in your prime wage-earning years, a disability (whether long-term or permanent) can derail your financial goals like owning a house or paying for your children’s education. If you have long-term disability insurance, you will get paid when you get injured or ill, making you unable to perform any job you are hired for.
The good news is that most companies offer long-term disability insurance to their employees, so start there. Decide how much disability insurance you need to avail. And when you’re looking for your options, you might find short-term disability insurance for injuries or illnesses that may keep you out of work for three to six months. This is the type of insurance you can skip, especially if you have a fully-funded emergency fund.
Disability insurance is relatively affordable, and it can provide tremendous financial help if you become disabled for any length of time. It’s especially a good idea if you work in a particularly dangerous job setting.
2. Life Insurance
Life insurance is the type of insurance whose payoff won’t be received by the insured. It covers the costs associated with dying, and it will be availed by the financially dependent people on you. If your parents, spouse, children, or other dependents would face financial hardships if you died, then life insurance is a must. Think about how much you earn annually, and buy a policy to replace that income in the event of your untimely demise. It also includes burial and mortuary fees that may cause a burden for many families. Life insurance can also help pay off any debts or provide for the everyday expenses of the family you left behind.
Many financial experts say that life insurance must be a central part of your financial plan. If you are young and single, your need for this insurance policy is minimal. But if you are a parent or supporting a family, getting life insurance is crucial. If you’re married with dependents, it can replace lost income, help pay debts, or even pay for your child’s college education even when you’re gone. If you are single, it could pay off burial costs and any debts you left behind. Read on some tips for choosing the right life insurance policy for your specific needs.
However, if you pass away after the expiration date of your life insurance coverage, your beneficiaries will not receive your death benefit. And if you make any false claims and your insurer finds out, they may deny your beneficiary claims.
3. Health Insurance
Nowadays, medical care costs are too high, and even a simple visit to the doctor can result in a hefty bill. And if you get serious injuries, it can generate a bill that’s higher than a one-week stay at a luxury resort. One unexpected major medical emergency can amount to hundreds of thousands of dollars of expenses. Health insurance can help cover or at least lower your bill significantly.
Medical debt contributes to about half of all bankruptcies in America, making health insurance is one of the most important types of insurance that you must have. Every adult must have health insurance, and children must be covered under one of their parents’ plans. Though the cost of health insurance can be a financial burden, the potential cost of not having much coverage is much more. Besides that, there is also the possibility of false claims. It can make the situation even more complicated. Therefore, it is essential that you know a False Claims Act attorney who can help you out of this situation.
When you’re buying health insurance, you have to consider your needs. If you have chronic health issues and if you think you’re going to be using your insurance frequently, it’s best to find a plan with a low deductible and copays. Also, if you like your physician, try to find a plan that allows you to keep your current doctor.
If you want to understand how health insurance works, read on here.
4. Homeowners or Renters Insurance
For most people, a home is their greatest asset and investment. Having home insurance can protect you by giving you a financial safety net when damage occurs. It covers your home against theft and damage, as well as other dangers like damage to visitors’ property or any cost if someone gets injured in your property. Insurance also covers your house’s foundation, walls, roof, and other personal property. However, you may need additional insurance to cover damage caused by natural disasters. Here are some things to know about before purchasing a homeowner’s insurance .
Getting home insurance is a good idea even if you have paid off your mortgage because it shields you against expenses for property damage. It can also protect you against liability for property damage or injuries to guests caused by you, your family, or your pets. It can pay to repair or rebuild structures damaged by a covered claim.
If you are renting an apartment, a renters’ policy is just as essential – for some, it may even be required. Your landlord’s insurance can cover the structure of the apartment, but your personal items can add up to a lot of money. If a fire, burglary, or disaster happens, your renter’s policy should cover most of the costs. This means that looking for renters insurance is no longer optional. It’s necessary.
5. Automobile Insurance
Car insurance is essential if you own a car and if you drive. Not only is it required in most states, but car accidents can be costly. A car accident could quickly cost you more than $12,000 even without any injuries, and it can rack up to more than a million if a crash is fatal. These costs come from vehicle damage, medical expenses, wage losses of everyone involved, and more.
Basic auto liability insurance covers property damage, injuries or death, and legal fees to others when you are legally responsible. Here are some options for car insurance that covers different scenarios, including:
- Liability coverage – covers the cost of any injuries or property damage you caused during an accident. It comes in two forms: bodily injury and property damage liability. It doesn’t cover the driver or passengers, only pedestrians, and other motorists.
- Collision coverage – covers the cost to repair or replace your car if it gets damaged or destroyed in a wreck, whether you’re at fault or not.
- Comprehensive coverage – covers the damage losses that aren’t caused by accident, whether it’s vandalism, theft, flood, fire, hail, or even a tree falling on your car.
- Uninsured or underinsured motorist – covers your costs if the person who causes damage to your car doesn’t have enough insurance to cover the damage.
- Personal injury protection – covers medical expenses related to the driver and passenger.
Bottom Line
Insurance plays a critical yet straightforward role: it replaces economic loss in an accident, injury, illness, death, or any catastrophe. The forms of insurance mentioned above are a must to ensure you and your family won’t take a big financial hit when something unfortunate happens. You may avail of other forms of insurance to protect yourself but only buy insurance policies when there’s a reasonable chance you’ll collect.