On the path to financial stability, it’s easy to overlook the need for insurance. Why pay money every month for something you might or might not need when that premium could be used elsewhere?
It’s understandable to think that way, but financial experts swear by a lot of insurance coverage. Accidents happen, and you need to be able to protect your assets when they do.
As the saying goes, it’s better to be safe than sorry. That doesn’t mean you need to buy every insurance coverage you’re offered when you check out at the store. But there are some insurance coverages you shouldn’t go without, like these seven essential policies.
1. Health Insurance
Medical insurance protects you and your family from major hospital bills. Even if you carry a policy with a large deductible and copays, the out-of-pocket cap ensures you won’t pay more than that specific amount, no matter what happens.
However, decent health insurance coverage can be astronomical and out of reach for some budgets.
If you can’t justify hundreds of dollars a month for medical premiums, get a high deductible plan. Then invest extra funds into a health savings account. Alternatively, you can open a savings account for medical coverage only.
2. Auto Insurance
If you own a vehicle, having auto insurance isn’t just smart. In many states, it’s required by law.
On average, there are more than 16,000 car accidents per day in the United States. That’s about 6 million accidents every year, which puts the odds that you’ll be involved in one at some time in your life pretty high.
Whether you cause the accident or not, if someone is injured or your car is damaged, auto insurance will make the entire process easier for you. It also prevents the injured party from coming after your personal assets.
3. Disability Insurance
When you’re out of work due to an injury or illness, you may not get compensated for that leave. Disability insurance steps in to cover a percentage of your salary.
There are different types of disability coverage, including short and long-term. Some will cover up to 40% of your pay, while others allow up to 60%.
The majority of Americans live a paycheck-to-paycheck lifestyle. Being out of work for just one week can throw them into a debt spiral they’ll have a hard time getting out of. Disability coverage is an affordable way of preventing financial hardship.
For more about what to look for in the best disability insurance coverage, read this article by Physicians Thrive.
4. Home or Renter’s Coverage
Your most prized possessions are stored safely in your home. But when something happens that harms your house, homeowners’ or renters’ insurance comes in handy. It can help you replace or repair the damaged goods.
This coverage also protects you from being held liable in the event that someone is injured on your property.
Typical insurance company policies for this type of protection include limited coverage. Common problems like accidental fire damage or lightning strikes are in almost every policy.
If you live in an area that’s prone to hurricanes, flood, wildfire, and other natural disasters, check your policy carefully. You may need to add on a rider to cover these catastrophes.
5. Life Insurance
There are two types of life insurance: term and whole. Each of these coverages has its pros and cons, but you should have at least one of them.
Term life insurance is usually more affordable because if you don’t use it by the end of the policy period, it expires. Terms run anywhere from ten to thirty years. If the policyholder passes away during that time, their beneficiary is given the death benefit payout.
Whole life insurance never expires. You pay into it throughout your entire life, and when you pass away, your beneficiaries are given the death benefit payout.
Term is cheaper because there is less risk involved. Chances are, you’re going to survive the term of your coverage and not need a death benefit. With whole life, you’re definitely going to use your policy at some point. The choice of coverage you need is up to you.
6. Long-Term Care
A common misconception is that when a person reaches the age of Medicare and Social Security, their insurance will cover nursing home and long-term care help.
In most cases, this isn’t true. As we age, we sometimes need the aid of an assisted living facility or in-home help. Without long-term care insurance, this is paid for out of pocket.
You might be able to “afford it,” but why break into your retirement and hard-earned savings when you can get affordable coverage instead?
7. Mortgage Insurance
When you bought your home, you were offered mortgage insurance coverage. This is a smart idea if you don’t want your estate to have to pay for the home if something happens to you before it’s paid off.
Mortgage insurance also steps in if you are unable to pay the premiums due to a layoff, illness, or an accident. It prevents your mortgage from defaulting and keeps you from possibly losing your home.
Conclusion
Financial savviness means more than having your expenses covered and money in the bank. You have to protect your assets from potential catastrophes in the future. These seven insurances are must-haves for anyone looking to stay financially stable throughout their lives.
Comments