As you navigate the world, there will be some common things you come across. One part of life that people can’t seem to get around is insurance. There are a lot of different insurances that you can encounter from auto insurance, to business insurance, to life insurance, the list goes on! However, good insurance isn’t free. That being said, what insurances do you truly need and what are just an additional safety net that you could probably do without? Well the answer for that can vary per person but there are some key fundamental insurances that you may want to make sure you have.
Different Insurance Policies That Matter
Most people first start becoming aware of insurance with auto insurance. That’s because auto insurance is mandatory for nearly all the states in America. However, other common insurances that people come across include health insurance, life insurance, and home insurance.
Despite significant advancements in automotive safety, the National Highway Traffic Safety Administration reported a staggering 42,795 fatalities resulting from vehicular accidents in the U.S. for 2022. The law mandates drivers in most states to have auto insurance. Those in states where it’s not required by law are still financially accountable for any damages they inflict. Insurance costs depend on individual circumstances, and policyholders are advised to compare rates periodically to see if they qualify for lower premiums.
Auto insurance options include liability coverage, which pays for damages and injuries inflicted by the policyholder in an accident, as well as litigation costs if sued. Comprehensive and collision coverage pay for car repairs or replacement after an accident or in the event of theft and damage due to natural disasters or vandalism. Uninsured/underinsured motorist (UM) coverage caters to medical expenses if struck by an uninsured or underinsured driver. Personal injury protection (PIP) and medical payment coverage reimburse rehabilitation and lost wage costs for the policyholder and passengers if injured.
Health insurance is like a safety net that helps pay for your medical care. There are different types:
- Employer health insurance: This is when your job provides health insurance as part of your benefits. It often covers you and can sometimes cover your family too.
- Private health insurance: If you don’t get insurance from your job, you can buy it yourself. You pay a company every month, and in return, they help pay for your doctor visits and medicine.
- Government health insurance: Some people might get help from the government to pay for health insurance. This includes programs like Medicare (mostly for older people) and Medicaid (for people with lower incomes).
- Direct insurance from hospitals or doctor groups: Some hospitals or groups of doctors offer their own insurance plans. You pay them directly and can only go to their doctors or hospitals for care.
Remember, it’s important to have some kind of health insurance to help cover the costs if you get sick or injured. You want to compare the options out there to find the best fit for your situation and needs!
Life insurance comes in two primary forms: traditional whole life and term life. Whole life insurance provides a death benefit alongside a cash value component. This component can be accessed through loans or withdrawals, and the policy can be ended by taking its cash value. Term life insurance, on the other hand, offers coverage for a specific period, such as 10, 20, or 30 years, with stable premiums and is generally more affordable. It is often used to cover periods of significant financial obligation, such as during mortgage repayment or children’s college years.
Life insurance is particularly crucial for families reliant on one person’s income, with industry experts recommending a policy that pays out 10 times the breadwinner’s annual salary. There are a variety of expenses to consider when determining the life insurance amount such as:
- Funeral expenses
- Daily living expenses
- Future costs like child care or college
Home insurance is really important because it’s like a big safety net for your house. If something bad happens, like a fire, a storm, or someone breaking into your house, home insurance can help cover the costs to fix or replace your stuff. It’s not just about the building, it can also help protect everything inside, like your furniture, clothes, and electronics. Plus, if someone gets hurt at your house, like slipping on your porch, it could even help pay for their medical bills. So, having home insurance means you don’t have to worry as much about all the what-ifs because you have some sort of protection.
All in All
Understanding insurance coverage is crucial for protecting yourself and your assets. There are a variety of different insurance coverages out there. However, a few that were highlighted that are especially important include auto insurance, home insurance, health insurance, and life insurance. Consider coverage options, costs, and benefits to make informed decisions when choosing the right policies. Review your coverage periodically to ensure it aligns with any changes in circumstances or goals. With a well-chosen policy, you can be confident that any unexpected events will be covered.