In today’s insurance world, there are hundreds of types of insurances available. This can be overwhelming at times – trying to decide what you should have and what is just a gimmick. With so many gimmick insurances out there that sound good, I want to help you sort through them so that you have everything you need in case “life” happens to you. Today, I want to share the 6 types of insurance policies everyone should have.
- Home/Renters – If you live on your own, you need some type of insurance to cover your belongings. Home insurance is obvious and is required by mortgage companies to have. But renters insurance is just as important. If you are renting, you don’t need to replace the actual home/unit you live in. However, your stuff is valuable and you would want something in place to cover if anything happens to it. Renters insurance is extremely inexpensive. Just like all insurance, don’t overbuy. A $10,000 policy is enough in most cases. Take an inventory and make sure you have enough to cover your valuables.
- Auto – Auto insurance is another mandatory insurance if you own a vehicle. Make sure you have enough to cover the car you own and that you have the right coverage for the age of the vehicle. Make sure your deductible is in line with your emergency fund. If you have a good emergency fund, raise your deductible in order to save money. Going from $500 to $1000 can save you hundreds a year.
- Health – At the moment health insurance is mandatory with a penalty if you don’t have it. But many Americans have chosen to pay the penalty over having the insurance. I know health insurance is crazy right now, but not having it can cost you way more than having it. You may be young and healthy, but that can change in a moment. Our son had his appendix removed a few years ago and without insurance it would have cost over $50,000. Without some form of health insurance he would have been responsible for that and most 26 year olds don’t have that kind of cash laying around. Shop around and find some form of health insurance even if the deductible is a little high. $5,000 is easier to pay off than $50,000.
- Life – If you have a spouse, kids, a house, debt, you must have life insurance. When you die, you don’t want to leave a burden for your spouse or family. At the very least, get a term policy to cover your income and debt. Ideal is to get 10 times your income and I highly recommend this, but so many people get no insurance because they think they can’t afford the ideal. Start somewhere and add to it as you can. Term is always better than life, but something is better than nothing.
- Long Term Care – If you are 60 or older, you need long term care insurance. People are living longer and the price of elderly care is rising. The younger you are when you get long term care insurance, the less expensive it is. And if you all the sudden are diagnosed with something, you may not be able to get it. Remember, this doesn’t just cover a nursing home – it covers in home care and many other items that health insurance won’t cover.
- Long Term Disability – What would happen to your finances if you were disabled or had a long term health condition? This insurance will help relieve the stress of an already stressful situation. Again, this is a relatively inexpensive insurance, but can change your world if needed.
There are a few other that may be good to have in your situation – umbrella policy, identity theft insurance, etc. But you need to understand that many policies seem like a good idea, but are really just gimmick insurances. 2 examples come to mind right away – pet insurance and cancer insurance. An emergency fund will cover any pet costs and your health insurance and long term disability will cover cancer cost. If you run the numbers on this policies, you would see that if you take what the policy costs and save it, you will be covered if the emergency happens.
So now that you are ready to get your insurance portfolio up to date, where do you go? I always recommend an independent agent who can shop the best policy and company for you among hundreds. Your goal is to get exactly what you need at the best possible price. You may be saying “I can’t afford all this insurance” but can you really afford to not have it? Shop around and set a goal to have all six in place as soon as you can. You won’t regret it!