How to Figure Out Which Insurance Policies Are Most Essential

With household budgets being squeezed nationwide, working out which insurance policies are essential – and which aren’t – is more important than ever before. The key is to figure out which events, should you not have insurance, would result in financial hardship or worse. From here, you can identify the plans you really need.

To make things easier, we’ve done the legwork for you. Below are the essential forms of insurance policies you need to purchase, depending on your individual circumstances.

Home Insurance

While there’s no legal requirement to take out a home insurance policy, many mortgage providers will require you to have home insurance in place to protect their interests. Most policies offer combined protection, covering the dwelling itself, your personal property, liability cover, other structures on the premises, and temporary living expenses.

A typical home insurance policy won’t cover damage caused as a result of earthquakes or floods, but separate insurance can be purchased to protect against these risks.

Renters Insurance

If you rent your home, taking out renters insurance is important. It will typically cover your personal possessions (including furniture, electronics, and clothing) in the event of damage or theft. Plus, most policies also provide indemnity regarding liability coverage and temporary living expenses coverage.

If you’re wondering how much renters insurance is, you may be surprised to find that you can take out a policy for as little as $5 a month. A small amount to pay for protection and peace of mind.

Auto Insurance

Unlike home and renters insurance, it is a legal requirement to have auto insurance in almost every state. There are several different types of auto insurance plans available that provide, for example, liability coverage, uninsured or underinsured motorist cover, personal injury protection, medical payment coverage, and comprehensive and collision coverage. The latter is often sold as a package and is optional, although if you’re purchasing your car through a finance or leasing agreement, the lender will require that you buy it.

Life Insurance

It’s vital to take out a life insurance policy if anyone depends on you financially. It’s an effective means to replace your income in the event that you unexpectedly pass away. There are two main types of life insurance policies: term life insurance and permanent life insurance.

Term life insurance is typically the most affordable for those who want to cover a specific financial obligation, such as the years a child spends attending college. This type of life insurance allows the buyer to lock in rates for a specific length of time.

Permanent life insurance, on the other hand, is designed to provide a lifetime of coverage. It tends to be more expensive than term life insurance but offers benefits such as allowing the policyholder to build cash value as a supplement to retirement savings.

Health Insurance

If you’re uninsured and come up against a big medical bill, you could face financial ruin. Just a three-day stay in the hospital may amount to a bill of around $30,000. In most cases, you can take out a health insurance plan via your employer.

Where this is not the case, or for those who are unemployed, the federal health insurance marketplace provides access to a variety of health insurance policies.

Health insurance plans can also be purchased directly from insurance providers or via the services of a health insurance broker or agent.

Disability Insurance

Disability insurance provides vital protection should you become disabled or sick and, therefore, unable to work by supplementing a portion of your income. This type of plan will typically replace 40% to 70% of your base income.

As well as Social Security disability benefits, coverage can be acquired via a group disability insurance policy through your employer or an individual disability policy that you purchase on your own.

Long-Term Care Insurance

According to the Department of Health and Human Services, there’s a 70% chance that adults aged 65 and over will require long-term care at some point. The fact that it costs, on average, $9,000 a month to stay in a private room in a care facility demonstrates the importance of having long-term care insurance in place.

This kind of insurance plan provides coverage for expenses related to, for example, adult day care, in-home care, and stays in nursing homes. Buying long-term care insurance is typically best to purchase when you’re in your 50s and 60s, although it’s important to remember that, as you age, the cost of your premiums will increase.

The Takeaway: Insurance Policies for Life

Use the guide above to identify the essential insurance policies to purchase. As well as providing you with the cover you need – should the worst happen – insurance plans offer valuable peace of mind so you can get on with enjoying life, knowing that you’re protected.