Insurance can primarily safeguard and assure the safety of what matters most to you, whether it's your health, car, house, or family. We can't keep the unexpected from occurring, but we can secure ourselves and our families from the devastating financial fallout.
Many different types of insurance lend a helping hand after unexpected disasters. Below are the five most common and you can't go without.
Life Insurance
Finding the best life insurance is critical if you're the primary wage earner in your household. According to the Life Insurance Marketing and Research Association (LIMRA), 44% of American families would be confronted by money problems within six months if the breadwinner died.
For 28% of U.S. households, it'd take just a month. Life insurance is an excellent way to sub for your income if you pass away unexpectedly. Generally, there are two types of life insurance:
Permanent Life Insurance - This insurance instrument can be an income tool. It includes a cash value and death benefit component. As the cash value grows, the insured can retrieve the money by withdrawing funds or taking a loan. Additionally, you can end the whole life insurance policy by securing the policy's cash value.
Term Life Insurance - This policy covers you for a predetermined amount of time, say, 15, 30, or 45 years. Your premiums stay the same during this time. Once the term ends, you can renew the term life insurance policy yearly but at a more expensive cost each time. This policy may suit you if you want to cover a particular liability, such as a debt or college years.
Health Insurance
According to the American Public Health Association, medical and hospital bills are one of the most significant causes of money problems in the U.S. Additionally, according to Healthcare.gov., even if you're healthy and young, a three-day hospital stay could cost you at least $30,000.
That's a lot! If you're uninsured, this cost could cause suffering to your finances. Health insurance can be acquired through a private insurance company, the federal marketplace, or your employer.
The average health insurance cost varies significantly by insurance company, tier, plan type, and age. Individuals eligible for subsidies or premium tax credits qualify for lower rates based on their total household income.
A high-deductible plan can make monthly premiums more cost-effective with the supplementary tax-free dollars of a health savings account.
Generally, you can purchase health insurance only during open enrollment periods, which differs by insurer. But for marketplace health insurance plans, open enrollment is typically from Nov. 1 to Jan. 15, except if you have a qualifying life event, such as getting married or having a baby.
Disability Insurance
This type of insurance is often disregarded, but disability insurance is critical. One in five U.S. residents will have a disability lasting at least a year before they reach 65.
You may think you need this insurance only if your job involves hazardous activities. However, take note that most disabilities are not job-related. According to the Council for Disabilities Awareness, back pain, diabetes, cancer, and arthritis are among the major causes of disabilities.
As such, it's wise to consider this type of insurance as part of your financial planning. If you become disabled or sick, leaving you incapable and unfit to work, disability insurance tops up a portion of your income.
Typically, it replaces at least 40%-70% of your base income and has a waiting time before coverage takes effect. Plus, it has a cap or limitation on how much it compensates monthly. You can qualify for Social Security disability benefits, get group disability insurance via work, or purchase independently.
Car Insurance
According to the National Highway Traffic Safety Administration, about 31,785 individuals died in car accidents in the first nine months of 2022. The number is pretty significant despite the improvements in car safety.
Nearly all U.S. states oblige drivers to have car insurance. It's illegal to drive without one, and it could cost you hundreds of dollars if you get in a traffic accident, specifically if you're at fault.
Here are your typical options when buying car insurance:
Comprehensive and Collision Coverage: This coverage pays to replace or repair your vehicle after an accident, no matter who's at fault. It covers theft and damage to your vehicle due to animal strikes, falling objects, vandalism, fire, hail, and floods.
Liability Coverage: It pays for injuries and property damage you cause to others if you're responsible for an accident. Also, liability coverage covers settlements or litigation costs if you're sued because of a traffic accident.
Underinsured or Uninsured Motorist Coverage: if an underinsured or uninsured driver hits your car, this coverage pays for the driver's and passengers' medical expenses. It also compensates for pain and suffering or lost income.
Homeowners Insurance
Your house is your biggest asset; you'd do everything to protect it. One way to do that is getting homeowners insurance. Let's say your house gets destroyed or damaged by a covered problem like a house fire, and you need sufficient coverage to rebuild or repair your house and restore your personal belongings.
Home insurance policies generally round off different types of coverage, including:
Liability Coverage: It pays for property damage or injuries you unintentionally cause to others. Liability coverage also pays for your legal fees if you get wrapped up in a legal battle.
Dwelling Coverage: Dwelling coverage protects your house's structure, from your roof to your floors, from unexpected events like vandalism, theft, wind, or fire. This coverage pays to replace or repair structures attached to your house, such as your deck or garage.
Personal Property Coverage: This coverage secures your belongings, such as clothing, appliances, and furniture. Problems covered include explosions, fire, and theft.
Takeaway
Having the relevant insurance can stave off financial woes and smoothen the road to recovery. Assessing your budget constraints and personal insurance needs with an insurance agent can help you decide which policies to purchase and how much coverage you'll need.
