Life often throws us curveballs. While we usually can’t stop the unexpected from occurring, sometimes we can opt for protection. Insurance is meant to give us some measure of protection, at least financially, should certain things happen. There are numerous insurance options available and many financial experts tell us that we need to have these insurance policies in place. Yet, with so many choices, it can be difficult to determine what insurance you really need. Purchasing the right insurance is always determined by your specific situation. Factors such as children, age, lifestyle, and employment benefits should all be considered when building your insurance portfolio.
There are, however, four types of insurance that most financial experts recommend we all have: life, health, auto, and long-term disability.
4 Types Of Insurance Everyone Needs
The greatest benefit of having life insurance is the ability to provide for those you leave behind. This is especially important if you have a family that is dependent on your salary to pay the bills. Industry experts suggest a life insurance policy that covers “10 times your yearly income.“
When estimating the amount of life insurance coverage you need, remember to factor in not only funeral expenses, but also other living expenses. These may include mortgage payments, outstanding loans, credit card debt, taxes, child care, ,and future college costs.
According to a 2018 study by LIMRA, one of the largest associations in the U.S. insurance industry, one in three families might not be able to meet their day-to-day expenses within a month of the primary breadwinner’s death.
The two basic types of life insurance are traditional whole life and term life. Simply explained, whole life can be an income as well as an insurance instrument, as long as you continue to pay the premiums until you die. Term life is a policy for a set amount of time. There are considerable differences between the two types of policies, so you may want to seek the advice of a financial expert before you decide which is best for you. Factors to consider include your age, occupation, and number of dependent children.
Statistically, your family is just one serious illness away from bankruptcy, according to a study published by the American Journal of Public Health in 2019. Other studies found the same. In the Journal’s survey of more than 900 Americans who filed for personal bankruptcy between 2013 and 2016, more than two in three bankruptcies were caused by medical problems either from bills, income loss due to illness or both. What’s more, it’s mostly people who are middle class and have health insurance who are filing for bankruptcies.
Those numbers alone should incentivize you to obtain health insurance, or review and possibly increase your current coverage. While the best and least expensive option is participating in your employer’s insurance program, many smaller businesses do not offer this benefit.
According to research published by the Kaiser Family Foundation in 2019, the average annual premium cost to the employee in an employer-sponsored health care program was $7,188 for single coverage and $20,576 for a family plan.
If you don’t have health insurance through an employer, check with trade organizations or associations you belong to about possible group health coverage. Ultimately, the key to finding adequate coverage is shopping around.
With rising co-payments, increased deductibles, and dropped coverages, health insurance has become a luxury fewer and fewer people can afford. But when you consider that the national average cost for one day in the hospital was $2,517 in 2018, even a minimal policy is better than none.
Approximately 27.5 million Americans were without health insurance coverage in 2018, according to the U.S. Census Bureau. Although significantly lower than pre-Affordable Care Act days, that number increased from 25.6 million in 2017.
Long-Term Disability Coverage
Often, even those workers who have great health insurance, a nice nest egg, and a good life insurance policy don’t prepare for the day when they might not be able to work for weeks or months, or may never be able to return to the job. While health insurance pays for hospitalization and medical bills, what about those daily expenses that your paycheck generally covers?
- Disability Causes Nearly 50% of all Mortgage Foreclosures, 2% are Caused by Death
- Close to 90% of Disabling Accidents and Illnesses Are not Work Related
- In the Last 10 Minutes, 498 Americans Became Disabled
Many employers offer both short- and long-term disability insurance as part of their benefits package. This would be the best option for securing affordable disability coverage. If your employer doesn’t offer long-term coverage, here are some things to consider before purchasing insurance on your own.
A policy that guarantees income replacement is the optimal policy. More often policies pay out 50% to 60% of your income. The cost of disability insurance is based on many factors, including age, lifestyle, and health. The average cost in 2018 was $2,700 per year. But before you buy, read the fine print. With many plans you need to wait three months before the insurance kicks in, get a maximum of three years’ worth of coverage, and find some significant policy exclusions.
There were over ten million traffic accidents in the U.S. in 2009 (latest available data) and 33,808 people died in motor vehicle crashes in those accidents, according to data released by the Fatality Analysis Reporting System (FARS). The number one cause of death for American’s between the ages of five and 34 were auto accidents. Over two million drivers and passengers received treatment in emergency rooms in 2009 and the costs of those accidents including deaths and disabling injuries was around $70 billion.
While all states do not require drivers to have auto insurance, most do have requirements regarding financial responsibility in the event of an accident. Many states do periodic random checks of drivers for proof of insurance. If you do not have coverage, the fines can vary by state and can range from the suspension of your license, to points on your driving record, to fines from $500 to $1,000.
If you drive without auto insurance and have an accident, the fines will probably be the least of your financial burden. Your car, like your home is a valuable asset you use every day. If your car is damaged in an accident and you have no auto insurance, you will have no way to replace that vehicle unless you have a large savings account and you don’t really want to tap into that savings when auto insurance could cover the cost.
If you, a passenger or the other driver is injured in the accident, your auto insurance will pay those expenses and help guard you against any litigation that might result from the accident. Auto insurance also protects your vehicle against theft, vandalism or a natural disaster such as a tornado or other weather related incidents.
Again, as with all insurances, your individual circumstances will determine the price of your auto insurance. The best advice is to seek out several rate quotes, read the coverage provided carefully and check periodically to see if you qualify for lower rates based on age, driving record or the area where you live.
While insurance is expensive and certainly takes a chunk out of your budget, being without it could lead to financial ruin. Always check with your employer first for available coverage, as this will probably be where you will find the most economical way to of securing coverage. If your employer doesn’t offer it, obtain multiple quotes from several insurance providers. Schedule times with agents who offer coverage in multiple areas as they may have some discounts available if you purchase more than one type of coverage. (For additional reading, see Understanding Your Insurance Contract.)
The expense of not having insurance is nothing compared to the expense of living without it.