What Types of Insurance You Should Have
June 15th, 2017 | 3 min. read
The outspoken boxer Mike Tyson famously said: “Everyone has a plan until they get punched in the mouth.” Life tends to throw us punches we don’t see coming, so it’s important to take the appropriate measures that’ll keep you on your feet. Financially, we soften the impact of those blows with various types of insurance.
Having the right insurance for your specific circumstances is a smart financial move. It helps keep an unfortunate event from becoming a catastrophic event. For example, although it may be unlikely you die anytime soon, if you have a spouse and children who depend on your income, the financial impact of your death would be severe. Therefore, life insurance is a necessity for your situation.
Of course, the peace of mind insurance can provide isn’t free. There are monthly premiums to pay, which can rise unexpectedly.
Here are some financial considerations with respect to some of the most common types of insurance.
At the time of this writing, you are mandated to have health insurance. Even if you are young and healthy, it is extremely risky not to have it. Consider that the average trip to the emergency room is $1,233.
Typically, if you are a full-time employee then you qualify for health insurance through your employer. Some companies will fully cover you, with the option to buy additional coverage for your family. Or, you must pay a premium for both yourself and your family.
If married, you may want to compare costs to see if it makes more financial sense for both of you to be on a single employer’s insurance.
Further, you may want to consider your medical history before signing up for a dental or vision plan. If you rarely need to visit the dentist, for example, paying out of pocket for your dental care may be cheaper than the insurance. Find out what services are offered and determine how much you think you would use them.
Life insurance is another type of insurance commonly offered by employers. Your company may pay one year’s salary to a beneficiary of your choice to help offset lost wages and income. Be sure to consider the appropriate beneficiary for your life insurance policy before you sign up.
Your primary life insurance, however, shouldn’t come through your employer; if you lose your job, then you lose your coverage. If you’re married and/or have children, you may need more coverage than your employer provides. Instead, purchase a term-life insurance policy from a separate provider. If you are single and not supporting anyone, life insurance may not be much of a financial priority.
Auto & Home Insurance
Nearly all states require drivers to have auto insurance. And, considering the numerous things that can potentially go wrong with a house, it would be a mistake as a homeowner to forgo home insurance.
Every six months to one year, you should review your insurance policies to make sure you’re getting the best rate and have the right amount of coverage. It’s easy to compare rates and coverage online. Further, most companies offer discounts if you bundle auto and home insurance.
Long-Term Care Insurance
Like all other types of insurance, the concept of long-term care insurance is to pay a relatively small premium today to offset the possibility of larger future expenses. Determining whether a long-term care policy is right for you depends on many personal factors, including:
- Health and family health history
- Current and future income needs
- Current and future assets
- Estate plan
- Level of support and care provided by family members
- Affordability of long-term care premiums
Everyone has unique needs that will affect their decision. Considering the high cost of long-term care insurance, speak with a qualified financial adviser who can help you understand and quantify whether it is appropriate for you.
If you have accumulated assets, and especially if you earn income from those assets, you are potentially vulnerable if you become involved in a lawsuit. If this situation applies to you, consider purchasing an umbrella policy, which will help preserve your assets and future incomes if you are liable.
Umbrella insurance is extra liability insurance designed to help protect you from major claims and lawsuits. It provides additional liability coverage above the limits of your homeowners, auto and other insurance policies as well as coverage for claims that may be excluded by other liability policies.
Other Types of Insurance
These days, you can purchase insurance coverage for just about anything, from kitchen appliances to electronic devices. It can make sense to buy coverage for a brand-new, expensive product like a refrigerator or computer. However, in some cases damage to a product – your smartphone, for example – is unlikely to make a substantial impact on your financial life. Therefore, you may want to skip the expensive extended warranties and put that money to better use.
Making decisions about the various types of insurance products available can be complicated. But, it’s worth it. Insurance can help secure your financial future. When it comes to your financial life, it’s not always the smart moves you make but the unfortunate events you avoid or survive that determine your success. It’s a concept more eloquently described by another, albeit fictional, pugilist named Rocky Balboa: “It ain’t about how hard you hit. It’s about how hard you can get hit and keep moving forward.”