Insurance is not a luxury but a necessity. It is a hedge or protection against unforeseen or unpredictable events. We can’t predict when or if a disaster would occur but insurance can provide some comfort in the event that it happens. Insurance gives peace of mind because you know that you are protected against the unexpected. There are different types of insurance policy available today and almost everything can be insured. However, some types of insurance policy are more deserving than others of a place in your financial plan. The right insurance to purchase is always determined by your specific situation like age, children , lifestyle and employment benefits.
Despite the numerous insurance options and the confusion it may bring, experts have recommended four must have insurance policies for everyone. These include: life, health, long term disability and auto insurance. Every one of these covers an important aspect of your life that is important to your financial future.
Types of Insurance Policy Everyone should own
Life Insurance Policy
This insurance policy is important if you are married or have kids but single people can still benefit . It ensures that your family, or dependants are provided for when you die. Death could come unexpectedly or timely but having a life insurance ensures that those you left behind, face little difficulty in moving on with their lives. For someone single, it could help pay off debts left behind and funeral expenses.
This insurance policy according to experts should be able to cover at least ten times your yearly income. This will enable the ones you left behind cover existing expenses, funeral expenses, and have money left to live on.
It is important when estimating the coverage amount to also factor in expenses like mortgage payments, credit cards, loans, child care and future college costs.
Two basic types of life insurance policy include; the Term life and the Permanent life. In Term life, your policy is for a specified amount of time, but in Permanent life it only terminates on your demise. The term life seems less expensive and more flexible, but permanent life allows you to build cash flow that you could borrow against or invest. You should consult an expert when deciding on the option as there exists considerable differences between both types.
Most employers have life insurance policy for their employees, so check it out with them first and decide whether you want an additional coverage.
In most types of life insurance, your age and health status would determine if you would get coverage. You should be prepared for a medical examination as part of the application process. However, there are a few insurance companies that offer this without medical exams, but the premiums are usually higher.
Health Insurance
This is one of the most important types of insurance policy to have. Without good health you will be unable to work and earn an income, and also enjoy life. A serious ailment or accident could happen and without insurance coverage you may be unable to receive treatment.
In a recent Harvard study, it was noted statistically that “ Your family is just one illness away from bankruptcy ”. That study also disclosed that in 2007, 62% of all bankruptcies in the US were as a result of health problems. 78% of these had medical insurance at the onset of their illness.
These statistics provide enough reasons to take health insurance more seriously and even when you already have a policy in place, should work on upgrading it. Even a minimal coverage is better than none as a result of the escalating costs of health care.
Many employers also offer health insurance benefits to full time employees and some even cover part time employees too. You should check out the status of your health insurance coverage with your employer and consider if it is enough to cater for your family’s needs. It may be wise to have an additional coverage in place if in the event that you consider it inadequate.
For people whose employer don’t offer health insurance cover or self-employed persons, putting in place your own cover is very necessary. The good news is that health insurance premiums that are paid out of pocket is tax deductible.
Auto Insurance
It makes sense for everyone who owns an automobile to make this one of the mandatory types of insurance policy to own. A car is an asset and this insurance policy would protect it in the event of theft or accident. An auto insurance also covers damages to the other vehicle, medical expenses and even legal costs.
Without an auto insurance and in the event of an accident, you may have to borrow or use your savings to cover the costs which may be substantial depending on the circumstances.
So many states in America make auto insurance mandatory and flouting the law could lead to serious penalty and fines.
In 2009, there were over ten million traffic accidents in the U.S resulting in death of 33,808 people, according to data by Fatality Analysis Reporting System (FARS). Auto accidents was also the number one cause of death for Americans aged between 5 and 34. Over two million drivers and passengers got treated in emergency rooms with the total costs of these accidents estimated at around $70 billion.
Long – Term Disability Insurance
A lot of people see this as one of the types of insurance policy that is not necessary. This is because no one assumes that they will ever be disabled. However, according to statistics from the Social Security Administration, three in every ten workers entering the workforce will become disabled before their age of retirement.
A good health insurance policy would cover health costs. But it would not cover living expenses in the event that one is unable to continue working; or stop work for extended periods of time due to disability. You will still need to cover the usual expenses that your paycheck would normally take care of. This is where the Long- Term Disability Insurance becomes useful. A major medical condition like cancer could result in the inability to work for over a year. And where there are expenses like mortgage payments and loan repayments to make, savings will most likely become inadequate.
Statistics show that;
- Almost 50% of all mortgage foreclosures were caused by disability
- Nearly 90% of all disabling accidents and illnesses weren’t work related
- 498 Americans become disabled every 10 minutes
Several employers ensure that there is short term or long term disability coverage for their employees. Check this out and if not satisfied, put in a place an adequate one with a private insurer.
An adequate policy should guarantee income replacement or at least 50-60% of your monthly income. Average insurance rate for group or employer coverage in 2009 was $ 238 per annum, which is considered affordable.
Conclusion
Insurance could seriously eat into your budget but being without it could result in financial ruin. We covered the types of insurance policy everyone should own, which were life, health, auto and long-term disability. Some of these may have already been provided by your employer ; so always check there first before deciding the next steps, if it doesn’t exists or is inadequate.
Insurance can be expensive but the expense of living without it could be outrageous.
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