What types of plans are there?
What are the benefits?
How do you know if you need it?
If there’s one thing in life you can count on, it’s that you can always expect the unexpected. And while we can’t always prevent it, we can certainly get some protection to help mitigate the repercussions from unexpected expenses that come up.
Insurance is meant to work as a financial safety net which allows you to protect yourself and your family against unforeseen circumstances. When you have something to lose, and you can’t afford to pay for a loss yourself, you pay for insurance. By paying money every month for it, you can have the confidence that if something goes wrong, the insurance company will pay for the things you need to make life like it was before your loss. You certainly don’t need to have insurance, but it is a good idea to have coverage when you have a lot of financial risk or investments on the line.
But there are numerous insurance options, and it can be difficult to determine what insurance you really need. There is no one-size-fits-all plan when it comes to insurance, your unique situation will determine what type and amount of insurance you need.
While there is a lot of information about insurance, you don’t need to understand it all to get started. There are, however, five types of insurance that most financial experts recommend we all have:
-
Life Insurance
Life insurance is intended to cover your funeral expenses and provide replacement income for your family after you die. The two basic types of life insurance are traditional whole life and term life. Whole life insurance covers you until you die and can be used as an income tool as well as an insurance instrument. Term life, on the other hand, is a policy that covers you for a set amount of time. There are other considerable differences between the two types of insurance which our advisors can help you understand better.
-
Health Insurance
According to a study published by the American Journal of Public Health in 2019, most people are just one serious illness away from bankruptcy. For those who have the option, participating in your employer’s insurance program may be the least expensive option available to you. If you don’t have health insurance through an employer, there are many trade organizations or associations that offer group health coverage. If that’s not an option either, then you’ll need to buy private health insurance.
-
Long-Term Disability Coverage
According to statistics from the Social Security Administration, one in four workers entering the workforce will become disabled and will be unable to work before they reach the age of retirement. Even people who have great health insurance, a fair amount of savings, and a good life insurance policy don’t always prepare for the possibility of not being able to work for weeks, months, or ever again. While health insurance pays for hospitalization and medical bills, long-term disability insurance will cover your daily expenses.
-
Auto Insurance
If you drive without auto insurance and have an accident, fines will probably be the least of your financial burden. If you, a passenger, or the other driver is injured in the accident, auto insurance will cover the expenses and help protect 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 hurricane or other weather-related incidents.
-
Residential Insurance
Home insurance covers the buildings on your property. This includes your main dwelling along with any other structures in the space. It also covers the contents of your dwelling, movable property kept at your home, living expenses if you need to vacate your home after a loss, and liability protection. Renters insurance covers your property kept in your rental unit as well as living expenses for vacating your home in the event of a loss.
There are many factors that go in to determining your insurance needs including your age, lifestyle, and current employment benefits. The insurance you need varies based on where you are at in your life, what kind of assets you have, and what your long-term goals and duties are.
There are also a few questions you can ask yourself that might help you decide what kind of coverage you need:
- What concerns you most?
- How much risk or loss of money can you cover on your own?
- Can you afford higher deductibles in order to reduce your costs?
- Do you have special needs in your life that require extra coverage?
While insurance is expensive, not having it could be far more costly. Finding the right insurance products is a strong way to manage your money and will help you stay on the right track even when the unexpected arises. That’s why it is crucially important to take the time to discuss what you want out of your policy with your financial advisor or insurance agent.