Various Types of Insurance Policies and When You Should Have Them
Insurance is at the bottom of the list of things we want to think about because it's complicated and confusing to many people, but it’s necessary to protect ourselves and our family members from financial disasters.
There are some policies that we need to maintain to have the things that we want (ex: car or homeowners’ insurance). Other policies are simply good decisions to protect your finances and loved ones (ex: life or disability insurance).
Your insurance coverage changes with your needs and goals throughout your life AND is completely unique to you. Getting a new job, adding a member to the family, buying a new house… all of these things will impact your insurance needs. While your policy is unique, here is a rundown of the types of insurance that most of us will run into throughout our lives.
Policies you should always have, regardless of age:
1. Health Insurance: Medical care is extremely expensive and without health insurance it would not be possible to afford healthcare. Having health insurance is the best option to avoid medical debt. Many Americans are covered by theirs or their spouse’s employer plan and those under age 26 usually stay on their parent’s plan.
Those without access to group policies can shop through the Health Insurance Marketplace for private insurance.
Insurance you need to start in your 20’s:
1. Auto Insurance: 49 out of 50 states require drivers to have auto insurance to cover property damage or bodily harm that results from an accident. The rates for these policies are based on age, credit, car make & model, gender, driving record, and location. Rates vary from different providers, so it important to shop around and compare likewise benefits.
2. Renters Insurance: If you’re renting from an individual or corporate entity, you most likely need renters’ insurance. Renters insurance is relatively inexpensive at an average of $15-20 per month, but it has huge value when something goes wrong (as it does when you least expect it.) Depending on your policy details, it can cover the cost to replace personal property and provide a temporary living situation if you are unable to occupy your space.
3. Disability Insurance: Disability insurance provides you with income should you become disabled and unable to work and is a necessity for those relying on a steady paycheck to support their families. The social security administration estimates that over 25% of today’s 20-year old’s will be disabled before retiring. Many people will receive basic disability coverage through their employer and some people choose to increase their coverage for long-term disabilities by purchasing private policies to supplement their employer’s coverage. The need for additional coverage is often overlooked because people assume they have enough coverage through their employer.
Insurance you may need in your 30’s:
1. Life Insurance: If another person relies on your income for their financial well-being, you should consider life insurance. Term life insurance is the most common policy used because the coverage is inexpensive and straightforward. Unlike permanent insurance, term insurance provides coverage for a set period of time (10, 20, 30 years). Purchasing these policies while you’re young allows you to lock in low rates for the duration of your coverage (premiums increase incrementally as you age). You’ll stop needing life insurance when your dependents no longer rely on your financial support.
2. Homeowners Insurance: Almost all mortgage lenders require homeowners’ insurance. This policy should cover everything from your home itself, your belongings, and liabilities (if someone is injured on your property).
Factors impacting your homeowner’s insurance premiums = Home location, size, age, and build of the home. If your house is in an area prone to wildfires, tornadoes, or hurricanes—your premiums will be higher. You’ll stop needing this coverage if you sell your home and resume renting, or if you change your living situation.
3. Pet Insurance: Not exactly considered a must-have, but if you have a breed that is known for costly medical procedures, you might want to consider it. Some plans will cover routine vet visits, vaccinations, and up to 90% of your vet bills.
Fun Fact: Insuring dogs is more costly than insuring cats.
Insurance you will need in your 40s or 50s based on your family's medical history:
1. Long-term Care Insurance: A person turning age 65 today has almost a 70% chance of needing some type of long-term care services and support in their remaining years.
Long-term care is not covered by Medicare, which means significant expenses at the end of a person’s life. People who are aging or disabled, who need help with activities of daily living can rely on long-term care insurance to shoulder the costs. As you get older, long-term care insurance premiums become more expensive. Start looking into long-term care policies before you need them.
Remember: Your insurance coverage changes with your needs and goals throughout your life and is completely unique to you. Your personal lifestyle, earning capacity and wants v. needs will impact your insurance coverage and must be discussed to prioritize and discover your optimal level of coverage.
If you would like to discuss your current insurance needs and review your existing policies, please contact our office and we will be happy to help ensure that your family is covered in the event of a loss.