Incidents happen. You never know what life will throw at you and a misfortune can be devastating.
That’s why you need insurance to be part of your financial plan – to protect your health, earning capacity and assets.
But with so many types of insurance, how do you know which ones are worth it and which ones you don’t need?
This article will help you answer that question by reviewing the 5 types of insurance everyone needs and why.
1. Health insurance
The first (and most common) type of insurance you need is health insurance. You never know when you’ll have a medical emergency, and they can get expensive quickly. In 2017, the average cost of an emergency room visit was
Most people get health insurance through their employer, but if you’re self-employed or unemployed, you can also get it through the federal health care marketplace at healthcare.gov. Depending on how much money you make, you may even qualify for a government-subsidized plan.
Otherwise, you can always get health insurance directly from a health insurance company. Consult with a health insurance broker to find the best one for your situation.
There are many types of health insurance plans. For example, you can get a high-deductible plan combined with a health savings account (HSA). This has many advantages.
For one thing, a high-deductible plan will lower your premiums (although it will also raise your deductible, so you’ll pay more out-of-pocket for each doctor’s visit). But it also qualifies you for an HSA, where you can set aside money to pay medical bills. The advantage of an HSA is that it is highly tax-efficient: you can deposit money into it tax-free (ie, deduct it from your taxes), invest the funds in it tax-free, and withdraw funds from it tax-free . It’s a triple whammy!
2. Car insurance
Each state requires a certain level of auto insurance to protect you, your vehicle, and others in the event of an accident.
Here are the different types of auto coverage you can get:
- Liability coverage— This covers any damage or injury you cause to others. It is required in almost every state.
- Uninsured/Underinsured Motorist (UM) Coverage—This pays for any medical expenses, lost wages, pain or suffering you or your passengers experience if you are hit by an uninsured motorist.
- Personal Injury Protection (PIP)— This covers any injuries, lost wages or rehabilitation costs for you and your passengers, no matter who is at fault for the accident.
- Medical Payments Coverage—This helps pay for all medical expenses (usually between
1000 dollarsand 5000 dollars) regardless of the error.
- Collision coverage—This covers damage to your vehicle, no matter who is at fault.
- Comprehensive coverage—This covers all non-collision damage or loss to your vehicle, including theft and damage from flood, hail, fire, vandalism, falling objects and animal strikes.
- Learner Driver Insurance—This is a flexible cover for those working to obtain a driver’s license.
You don’t need all types of auto coverage, but you should have a minimum of liability coverage and preferably more. Talk to an auto insurance agent to determine what’s best for your situation.
3. Life insurance
Life insurance protects those who are financially dependent on you (eg your spouse and children) if you die. Since we will all die at some point, this is extremely important to have. Anyway, only 54% of Americans have life insurance.
Life insurance can also help pay for your funeral and burial expenses, which otherwise often place an unexpected financial burden on your family.
There are two types of life insurance: term life insurance and whole life insurance. Term insurance is for a set period of time (eg 10, 20 or 30 years) and is usually more affordable, while whole life insurance provides coverage for a lifetime and has a cash value component that you can withdraw as part of your retirement .
Most experts recommend term life insurance for the average person, and the sooner you get it, the cheaper it will be because the risk of dying is lower. So check out some life insurance policies today!
4. Long-term disability insurance
Just as you never know when you will die, you never know when you will be in a serious accident that will also leave you disabled.
This is why you need long term disability insurance. Most employers will cover 3 to 6 months of short-term disability. But you also need long-term disability insurance, which usually kicks in after your short-term coverage ends and will replace between 40% and 70% of your income.
5. Owner’s or Renter’s Insurance
Finally, you need homeowner’s or renter’s insurance. Homeowner’s insurance helps to repair or replace your home if something happens to it, while renter’s insurance only covers your belongings in your home (since you don’t own the property).
However, you should look for a comprehensive homeowner’s insurance policy that covers damage, loss of property and the cost of temporarily living somewhere else while your home is rebuilt or repaired.
If you’ve financed your home (ie, you have a mortgage), your lender will likely require you to get homeowner’s insurance. And if you rent, your landlord may require you to get renter’s insurance as well.
After all, the purpose of obtaining insurance is to reduce risk. You don’t want to put yourself in the impossible position of getting a bill you can’t pay or leaving loved ones in financial straits.
So shop around for insurance policies in each of the five areas listed above. Compare prices, coverage, benefits and reviews online at sites like policygenius.com. It can take a long time to find the right policy, but it’s worth it. And you can always seek out an insurance broker to help you understand your options and be well informed