An insurance policy can protect you from the hazards of normal life, from floods and fires to car accidents and life-threatening illnesses. You can’t stop disasters from happening, but a good insurance policy can provide financial coverage for these unexpected expenses.
Protecting your most important assets is an important step in creating a solid personal financial plan. Here are five policies you shouldn’t do without.
- Choose a disability policy that provides enough coverage to enable you to enjoy your current lifestyle even if you can no longer continue working.
- Life insurance can help protect the people who are financially dependent on you and should be high on your list of required insurance policies.
- Health insurance is a necessity, even for young, healthy people who might not expect to need coverage.
- Replacing your home is an expensive proposition. Having the right homeowner’s insurance can make the process less difficult.
- Renters insurance offers peace of mind for renters in the event their personal property is damaged due to a covered loss.
1. Long-Term Disability Insurance
The prospect of long-term disability (LTD) is so frightening that some people choose to ignore it. While we all think that “nothing will happen to me,” relying on hope to protect your future earning power is not a good idea. Instead, choose a disability policy that provides enough coverage to enable you to enjoy your current lifestyle even if you can no longer continue working.
Long-term disability provides a monetary benefit equal to a portion (e.g., 50% or 60%) of the insured’s salary for covered disabilities. Long-term disability typically begins when short-term disability ends. To receive benefits, the disability must have occurred after the policy’s issuance and then, typically after a waiting period. You will need to provide medical information, often confirmed by a physician, to the insurer for consideration.
Most long-term disability insurance policies categorize disabilities as own occupation or any occupation.1 Own occupation means the insured, due to disability, is unable to perform their regular job or a similar job. Any occupation means the insured, due to disability, is unable to perform any job for which they are qualified.
2. Life Insurance
Life insurance protects the people who are financially dependent on you. If your parents, spouse, children, or other loved ones would face financial hardship if you died, you should place life insurance high on your list of priorities. Think about how much you earn each year (and the number of years you plan to remain employed), and purchase a policy to replace that income in the event of your untimely demise.
3. Health Insurance
The soaring cost of medical care is reason enough to make health insurance a necessity. Even a simple visit to the family doctor can result in a hefty bill. More serious injuries that result in a hospital stay can generate a bill that tops the price of a one-week stay at a luxury resort. Injuries that require surgery can quickly rack up five-figure costs.2 Although the cost of health insurance is a financial burden for just about everyone, the potential cost of not having coverage is much higher.
4. Homeowners Insurance
Replacing your home is an expensive proposition. Having the right homeowners insurance can make the process less difficult. When shopping for a policy, look for one that covers the replacement of the structure and the contents, in addition to the cost of living somewhere else while your home is repaired.
Keep in mind the cost of rebuilding doesn’t need to include the cost of the land since you already own it. Depending on the age of your home and the amenities it contains, the cost to replace it could be more or less than the price you paid for it. To get an accurate estimate, find out what local builders charge per square foot and multiply that number by the amount of space you will need to replace. Don’t forget to factor in the cost of upgrades and special features. Also, be sure the policy covers the cost of any liability for injuries that might occur on your property.
5. Automobile Insurance
Some level of automobile insurance is required by law in most places. Even if you are not required to have it, and you are driving an old clunker that has been paid off for years, automobile insurance is something you shouldn’t skip. If you are involved in an accident and someone is injured or their property is damaged, you may be subject to a lawsuit that could cost you everything you own. Accidents happen quickly and the results are often tragic. Having no automobile insurance or purchasing only the minimum required coverage saves you only a tiny amount of money and puts everything else you own at risk.
Shop for Insurance Carefully
Insurance policies come in a variety of shapes and sizes and boast many different features, benefits, and prices. Shop carefully, read the policies, and talk to a licensed insurance professional to be certain you understand the coverage and the cost. Make sure the policies you purchase are adequate for your needs and don’t sign on the dotted line until you are happy with the purchase.
Consider enlisting the service of an insurance broker as they can search for policies across several insurance companies to find coverage that best suits your needs. Ask the broker to provide you with several options so you can compare features, provisions, and rates. Be in control of your protection by being well-informed to make a decision.