Insurance premiums in the U.S. totaled $1.2 trillion in 2017. This includes health, property, and life insurance. With so many insurances available out there, how do you know what you really need and what types are not worth your money?
Insurance is the best way to cover you and your finances. Here’s each type of insurance you might need to stay prepared (along with a few you don’t need).
Homeowners or Rental Insurance
If you own your home, you need homeowners insurance. If there is damage to your home, it will cost you a pretty penny. Homeowners insurance helps you pay for home repairs, temporary lodging, or even a new home after you pay your deductible.
Your mortgage company requires you to have homeowners insurance. It protects their investment as well.
If you rent your place, you should seriously consider rental insurance. Even though your landlord covers the property, land, and structure, you need to cover your contents. Rental insurance is relatively inexpensive and can run as low as $10 a month depending on the coverage you need.
Like any other purchase, it’s always wise to shop around your homeowners or rental insurance. Get quotes and talk to your agent or this company about available discounts.
You need auto insurance if you have a car. Yes, every state requires you have it, but you also need it to pay for any expenses due to an accident.
If you are at fault for an accident, you need the liability coverage to help pay for the driver’s expenses. Auto insurance pays for more than just car expenses—it also pays for property damage and medical bills.
Auto insurance is a competitive industry, so you can also compare rates. You don’t always want to go for the cheapest rates because it may not be enough coverage. Take a look at the breakdown of different coverages in auto insurance to make sure you have enough in the event of an accident.
If you don’t have health insurance, you could go bankrupt with one hospital stay. There are various types of health insurance available, and you can get insurance through your work, on the marketplace, or through a private health insurance agency.
If you have a chronic health condition, you definitely need health insurance to help you afford the needed care. Health care continues to rise, so health insurance is a must for everyone even if you are in good health.
About 1 in 4 people will be disabled before they retire. This is a scary thought when you think about how would you pay your bills.
Would you be able to pay your bills if you had no income for a month? What about two, three, or even six months? Social Security Disability Insurance pays about $1,200 a month—is that enough?
Disability insurance helps you with unknown situations, and this is especially helpful if you are the primary income earner in your home. If you sustain an injury, your disability insurance will pay you while you can’t work.
You typically have to wait about 30 days for the policy to kick-in, so having an emergency fund is crucial to tide you over. These policies vary greatly between providers, so be sure you completely understand which situations qualify for benefits, how much benefits you can qualify for, and when you will receive payments.
Life insurance is pretty grim but is probably one of the most important policies out there. It protects your family financially to help pay your medical bills, burial costs, and gives them income when you pass away.
What Type of Insurance You Don’t Need
There are several other insurance policies out there that you may not need. Let’s take a look four of these policies.
1. Credit Card Insurance
If you have a balance on your credit card, this policy will pay your bill if you are unable to pay it for some reason. This sounds like a great policy, but you are better off putting that premium toward your credit card.
These plans are relatively limited and you can max out your benefits and still have debt. Don’t waste your money and try to save money by adding more money to your monthly payment.
2. Mortgage Life Insurance
It seems like a reasonable policy because it will pay of your mortgage should you pass away. However, if you already have a good life insurance plan, this policy should pay your family enough money to cover that mortgage along with other bills.
There is no need to purchase a separate policy to pay off your mortgage balance. Work with your life insurance agent to make sure you have enough benefits in your life insurance policy to cover all your expenses, including your mortgage.
3. Life Insurance for Children
Life insurance helps a family financially if someone should pass away prematurely. Your children are most likely not paying anything toward your bills. This means you shouldn’t need the pay out if something should happen to them because there is no loss of income.
It would be wise to put this premium money toward a 529 plan for your children’s education or an IRA. This money would be more useful for them in the future, and they can purchase a life insurance policy once they begin their careers.
There are a few times when a life insurance policy may make sense for children. If your child does work and contribute toward family expenses, you may miss this income if something would happen. You could try adding a rider to your life insurance policy versus purchasing a separate policy.
4. Cancer and Disease Insurance
Unfortunately, there are several holes in health insurance policies. This is why there are specific disease insurance policies, such as cancer insurance.
The main downfall of these policies is that they are so specific that they may not cover everything that pertains to the disease. You would be wise to just upgrade your current health insurance policy to cover these illnesses.
Final Thoughts on Different Types of Insurance
There are several types of insurance out there. Make sure you have enough coverage to cover yourself financially and your valuable possessions and you do your research.
Now you know what you need what type of insurance you need and what you don’t. Check out other advice on our blog to help you out financially like how to pay off medical bills.