Accidents happen. You never know what life will throw at you, and a single mishap can be devastating.
That’s why you need insurance to be part of your financial plan – to protect your health, earning power and possessions.
But with so many types of insurance out there, 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 looking at the 5 types of insurance that 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 ER 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 also qualify for a government-subsidized plan.
Alternatively, 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 out there. For example, you can get a high-deductible plan paired with a health savings account (HSA). This has many benefits.
For one, a high-deductible plan will lower your premiums (though 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 put money aside to pay medical bills. The advantage of an HSA is that it’s very 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. Vehicle insurance
Each state requires a 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 driver.
- Personal Injury Protection (PIP)—This covers any injuries, lost wages, or rehabilitation costs for you and your passengers, regardless of who is at fault for the accident.
- Coverage of medical payments –This helps pay for any medical expenses (usually between
1000 dollarsAND 5000 dollars) regardless of fault.
- Collision coverage –This covers damage to your car, regardless of who is at fault.
- Comprehensive coverage –This covers any damage to your car or loss that falls outside of a collision, including theft and damage from flood, hail, fire, vandalism, falling objects and animal strikes.
- Learner driver insurance–This is flexible coverage for those working to obtain a driver’s license.
You don’t need all kinds of auto coverage, but you should have liability coverage at a minimum, and preferably more. Talk to an auto insurance agent to determine what is 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 are all going to die at some point, this is incredibly important to have. And yet, only 54% of Americans you have a life insurance policy.
Life insurance can also help pay for the cost of your funeral and burial, 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 offers lifetime coverage and has a cash value component that can withdraw it as part of retirement.
Most experts recommend term life insurance for the average person, and the sooner you get it, the cheaper it will be since 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 have a serious, incapacitating accident.
This is why you need long term disability insurance. Most employers will cover 3 to 6 months of short-term disability. But beyond that, you need long-term disability insurance, which usually kicks in once your short-term coverage ends and will replace anywhere from 40% to 70% of your income.
5. Homeowner’s or renter’s insurance
Finally, you need homeowner’s or renter’s insurance. Homeowner’s insurance helps repair or replace your home if something happens to it, while renter’s insurance only covers your possessions inside your home (since you don’t own the property).
That said, you should look for a comprehensive homeowner’s insurance policy that covers damage, loss of property, and the cost of temporarily living elsewhere while your home is rebuilt or repaired.
If you’ve financed your home (ie, you have a mortgage), your lender will probably 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 mitigate risk. You don’t want to put yourself in the unlikely position of receiving a bill you can’t pay or leaving loved ones struggling financially.
So buy insurance policies in each of the five areas listed above. Compare prices, coverage, benefits and reviews online at sites like policygenius.com. It may take a long time to find the right policy, but it is worth it. And you can always get an insurance broker to help you know your options and be well informed