5 insurance policies everyone must have

09th November, 2021

Insurance policies help create a concrete financial plan for your future. They help allocate assets and safeguard the future of your family. Most people have a mix of insurance, which, in turn, helps them live a more secure life. Apart from security, insurance policies also act as a stepping stone to building wealth. A tax benefit is another reason to invest in an insurance policy. It is always better to have a mix of insurance policies. Here are 5 types of insurance policies that everyone should have.

1. Life insurance

Life insurance is the best way to ensure that the family is cared for if the primary breadwinner passes away. This policy will take care of your funeral expenses and the daily expenditure of your family. Before purchasing a policy, one must factor in all the living costs, such as the mortgage, monthly bills, car loans, taxes, child care, and credit card bills. It is also better to plan your children’s college funds. After calculating all the costs, you will get a specific amount if something happens to you. Ideally, a policy should cover ten times your monthly income. Of course, that is not always possible, so purchasing a policy that suits your needs is essential. One must pay the monthly premiums with ease, so the policy continues and does not lapse beforehand.

  • Types of life insurance policies
    There are two types of life insurance policies – Whole Life and Term Life. Term life covers you for a certain period, such as 10-30 years; whole life insurance, on the other hand, covers you for life. Also, people who purchase a whole life insurance policy enjoy the benefit of a cash reserve. The premiums for term life are much lower than that of whole life. If a person wishes to go for whole life insurance, they must pay high monthly premiums for the rest of their lives. Monthly premiums for term life are much more affordable, but they only ensure a death benefit. There is no cash vault or any other monetary gain. So, it is best to figure out what type of insurance suits you the best.

After calculating your living costs, loans, and debts, you must speak with an expert. It is also essential to do your research on the type of insurance policies. Most policies may seem a bit confusing, which is why it is crucial to analyze each point. Nonetheless, a person must have a life insurance policy, especially someone with a family.

2. Health insurance

Health insurance is one of the primary reasons Americans file for bankruptcy. Most of them get crushed under the medical bills that keep mounting upon them. Illnesses and diseases might occur unexpectedly, which is why financial experts recommend having health insurance. Even though the premium costs may seem high, it will be much more beneficial to have one in the long run.

In 2016, Kaiser Family Foundation and New York Times did a survey, and as per their findings, 1 in every 4 Americans had trouble paying their medical bills. And as per recent studies, about 1 out of 12 Americans went without medical insurance in 2018. With the cost of co-payments going higher, it is becoming more and more difficult for Americans to get affordable health insurance. If you are a working professional, it is advisable to get a job that offers medical insurance. Small agencies are unable to provide medical insurance for their employees. People who wish to purchase health insurance can do so by going through a network of health care providers.

Organizations such as Health Management Organizations (HMOs) or Point-of-Service Plans (POS) will help you navigate the process. They need you to select a primary care physician who will look after the patient, make recommendations about treatment, and provide referrals for medical specialists. Some organizations do not require referrals, and the rates are much lower for using in-network practitioners and services. Preferred-provider organizations or PPOs will help you out with that type of care plan.

Individuals who cannot get onto their employer’s health plan, or possible group health coverage, should purchase a private health insurance plan. Now, this may be a bit more expensive, but it is the best possible way to make sure you don’t drown in medical bills in case you are diagnosed with a severe illness.

It is essential to understand what you will be paid for by the insurance company and what you might have to pay for yourself. Susanne LeClair of West Palm Beach tells The Guardian that despite paying her $300 co-pay, the hospital began sending her medical bills amounting to thousands of dollars. This caused her to file for bankruptcy twice.

Some people go into medical debts despite having health insurance, so it is essential to have medical insurance and have the right one. One must scrutinize every detail of the insurance policy before buying one. It should cover doctor’s visits, hospital costs, medicines, and other medical facilities. Before investing in health insurance, you must cover all the basics. Once you are sure that the maximum amount of your medical costs will be covered no matter what, you should purchase the policy.

According to a study published in February 2019, approximately 530,000 bankruptcies filed annually are due to medical debts. To save yourself from medical debt in the future, you must invest in health insurance at the earliest.

3. Auto insurance
Most states require a car owner to have auto insurance. It provides protection against litigation in case of an accident. Auto insurance guards your vehicle against theft, vandalism, or a natural disaster. Some states might do random checks on vehicles. If you fail to provide proof of auto insurance, you might have to pay a fine of $500 or $1000. The driver’s license might likely get suspended, or points might be added to your driving record. Not having auto insurance is illegal in some states, so getting one at the earliest is important.

  • Types of auto insurance
    Every car owner can choose from three types of auto coverages – liability coverage, collision coverage, and comprehensive coverage.
  • Liability coverage
    This insurance covers the costs of any injury or property damage caused by the insurance holder. Every car owner must carry a minimum amount of liability coverage. It is best to check for this before investing in an auto insurance policy.
  • Collision coverage
    This covers the cost of replacing or repairing your car if it has been damaged or destroyed in an accident.
  • Comprehensive coverage
    This insurance covers losses such as vandalism, theft, fire, flood, or other natural calamity. According to the National Highway Traffic Safety Administration, 6.7 million car accidents were reported in the U.S in 2018. This number is enough of a reason to purchase car insurance.

Since auto accidents are so rampant in the country, getting auto insurance seems like the best option. Car owners shouldn’t skip on this insurance at any cost. You ensure your car and secure yourself in case of any physical damage done to you or the opposite party. Auto insurance does not require you to pay high monthly premiums. Some premiums can also be paid biannually or yearly. New car owners can go for the minimum coverage and increase it once they become financially stable.

Along with property damage, you will also be covered for funeral expenses or other medical bills associated with the accident. In 2019, approximately 38,800 people died in a car accident. As per the 2018 CDC data, car crashes were the number one cause of death for people between 5 and 24.

Getting auto insurance is a great way to make sure that any accidental car expense of the future is covered. Protecting yourself and your vehicle is essential, as most people’s primary mode of transportation is their car. If a car owner gets into an accident and doesn’t have auto insurance, they will pay for everything themselves. This might put a massive dent in an individual’s bank account. As soon as one purchases a car, one must choose a reliable auto insurance policy that will provide optimum coverage.

4. Homeowners’ insurance

Homeowners’ insurance is highly recommended for individuals who have just purchased a home. The policy covers any damage or loss to an individual’s residence. It also covers other assets, such as furnishings and remodeling. Liability coverage against accidents on the property or in the home is also taken care of by homeowners’ insurance. Homeowners’ insurance policy has a liability limit that determines the amount covered by the policy. Usually, this type of policy covers four types of incidents that may occur on the property – exterior damage, interior damage, an injury on the property, and damage or loss of personal belongings/assets.

If any of the four types of incidents occur, the homeowner will have to pay a deductible. A deductible is a specific amount that has to be paid by the policyholder, and the rest of it will be paid by the insurance agency. Suppose there is a mold problem in the house, and the homeowner wants to claim $7,000 for the damage, cleaning, and repair, a claim adjuster will estimate this amount, once the claim is approved, the owner will be given a deductible amount that they will have to pay; in this case, the owner will be given approximately $2000. The rest of the $5000 will be paid by the insurance company. When the deductible amount is high, the cost of the monthly premiums is low.

Every policy comes with a liability limit. It is essential to check for this limit before purchasing an insurance policy. Most homeowners’ policies do not cover damages caused by “act of war” or “act of God.” Individuals who live in an area prone to natural calamities should purchase a special policy that covers these kinds of damages.

5. Renter’s insurance

Renter’s insurance is another type of insurance that needs to be bought by individuals renting a place. This may seem like an added unnecessary cost for a renter, but it will pay off in the long run. This kind of insurance covers costs that may occur due to loss of personal belongings, liability, and loss of other additional living expenses. Most renters do not understand the importance of purchasing renter’s insurance unless they face some loss. Instead of waiting for something to happen, one must be prepared for loss or damage to the home. If something goes wrong, people who do not have renter’s insurance might have to pay out of their pockets.

If you are a homeowner, then it is best to purchase homeowners’ insurance, and if you are renting, go for the renter’s insurance. Even when the landlord has homeowners’ insurance, it might not cover the damages caused to a renter’s belongings, which is why experts recommend having a renter’s insurance. Either way, you must secure your home and your belongings.

Health Insurance, life insurance, auto insurance, and homeowners’ insurance are 4 types of insurance everyone must purchase. These cover your basic needs and also assist in creating a safety net for your family. Auto insurance is great for protecting you as well as the opposite person. Health insurance is another vital insurance policy. It will help cover your medical bills and make sure you don’t fall into any medical debt. With the addition of the homeowners’ insurance, a person can heave a sigh of relief.

When an individual is comfortably insured, they tend to live a much secure and peaceful life. Before purchasing any of the policies, it is necessary to speak with the agent at length. Every person must understand the criteria of each policy before investing in it. It is easy to miss out on some important points while buying a policy. This happens more often than not, which is why you must compare the policies well and take advice from a trusted agent.