Know The Types Of Insurance Policies To Own
You might be wondering why you even need insurance
. Paying for insurance is not really something that most of us likes to do, especially if we never end up needing it.However, it takes only one health issue or car accident and you will be so glad you paid for your insurance.
Paying for insurance is important because it transfers the monetary risk of a catastrophic event from you the insured, to the insurance company. The insurance company banks on the fact that most people aren't going to have a major event in any given period, and in fact, most people don't.
Because of that insurance companies make a lot of money. On the other hand, if you do have a major event, you'll be extremely glad you've been paying those premiums. The insurance is your umbrella for your rainy day.
Out of the many types of insurance out there, here we will discuss the most important types of insurance to have. What types of insurance you carry is really up to you, your personal financial situation, and whether you're secure enough to self-insure.
Some of the most important policies to own are health insurance, life insurance, homeowner's insurance, auto insurance, disability insurance, and long term care insurance.
Health insurance is something that everyone needs to buy. The risks of having an expensive major health issue are just too great to ignore.
If you don't believe it, just look at the stats. Medical bills are the number one cause of bankruptcy!
Health insurance can be extremely expensive, but not having coverage can be even more expensive, so take that into account. If your employer has good group health insurance coverage provided, and even pays part of the costs, take advantage of that plan. You'll almost always get a good group discount, and end up paying less than if you found coverage on your own.
Having life insurance isn't something that you do for yourself. It's something you set up to ensure that the loved ones you leave behind are provided for when you're gone.
Only two things in life are guaranteed, death and taxes. We know when our taxes are due, but we never know when our time on this earth is done.
Having life insurance allows you to plan for the sad scenario that you may not be around to help provide for your family during your prime earning years.
How much insurance should you have? A good rule of thumb is to have 8-10 times your annual salary in good 20 year term life insurance. So if you're making 50,000 a year, get a policy for $500,000.
Remember when buying policy that term life insurance is almost always a better idea than whole life or cash value insurance policies. Life insurance policies don't make good investment vehicles.
Invest outside of your life insurance, and buy term life. It costs a whole lot less, and you can save or invest the difference.
Buy good homeowner's insurance with guaranteed replacement cost, a policy in which if something happened to your home everything would be replaced no matter what it cost. Many companies did away with those types of policies a few years ago, so don't automatically assume that you already have it.
Many policies will only cover the cost of the home/possessions when you bought it, plus a maximum of 25%. If your home grows in value more than that, you're out of luck! Make sure you're covered!
You're usually required to have auto insurance, so this one should pretty much be a no brainer. Just make sure that you're shopping around for the best rates, and that you're covered for the things you think you're covered for.
Raise your deductibles to save some money, and if the car is older consider dropping collision coverage and just keeping liability. If you've had insurance for a while, try shopping around to lower your auto insurance costs.
Would you be able to continue providing for your family if you were to have an accident or be otherwise disabled? Disability Insurance is designed to replace income that is lost due to a short-term or permanent disability.
Having this type of insurance is usually a good idea. If your workplace offers disability as a part of your employment, even at a reduced rate - you may want to consider it.
When buying your disability insurance, buy it for 65% of your current income, and buy the policy with after tax dollars so your disability income isn't taxed on the other end.
Long Term Care Insurance is a good idea if you are 60 or older. Any younger and you probably don't even need to consider it just yet. After 60, it's important because almost 7 out of 10 people over the age of 65 will require long term care at some point in their lives.
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