I hope you never have to use what I’m about to discuss here: Insurance. Insurance is one of those financial products that you should have, but hope that you never actually use. Unfortunately, accidents do happen and those who have an insurance policy will be happy they planned ahead.
I never really enjoy listening to an insurance salesman at the employee benefits because they always seem to use fear to sell their product. But the fact is that insurance is all about the unknown and unimaginable happening, which is why you and your family should carefully consider these five insurance policies.
1. Umbrella Insurance
Simply put, an umbrella policy covers the remaining expenses left by your current insurance. For example, imagine that you were in an automobile accident and there was a judgment against you for $350,000, but your auto policy only covered up to $200,000. The remaining $150,000 balance would probably force you to sell all your assets and might mean that you need to declare bankruptcy. With an umbrella policy, the difference would be covered up to whatever amount your policy is declared for. Typically, 1-2 million dollar policies are standard, but higher umbrella policies are available if needed.
One of the most common misconceptions about umbrella insurance is that it’s too expensive to afford. When you start throwing words like 1 million dollar insurance policy, most people say that’s way out of their budget. But the fact is that many people can add an umbrella policy for $15 – $25 a month. The actual amount will depend on the insurance company you insure through as well as your credit score and other personal risk factors.
2. Term Life Insurance
If a tragic accident happened tomorrow to you, would your surviving family have the resources to cover the bills? Whenever the thought crosses my mind or when I hear of someone who dies unexpectedly, I’m always thankful that my wife and I have term life insurance policies. If you have a family and are the sole breadwinner, you definitely need to have a term life policy – no question in my opinion.
The factors determining the cost of your policy will depend on your age, health, and other medical conditions, so it’s better to start a policy now rather than waiting a year or two. Policies can vary greatly, but there’s no reason why you shouldn’t be able to find good quotes on term life insurance.
3. Renter’s Insurance
I can’t stress this enough, especially to the younger readers who might be fresh out of college. Get renter’s insurance – it’s just smart. If something happens to the apartment complex you’re living in and all your possessions are damaged, stolen, or completely destroyed, don’t go running to the landlord demanding full replacement. Your chances are slim to none. Most incidents are a matter of renter’s insurance, and if you don’t have coverage, you might be out thousands of dollars if an accident happens.
Most young renters don’t realize the importance of renter’s insurance and those who are told about it might feel too strapped for cash to start a policy. The truth is that a basic policy for an apartment or small rental can run as little as $100 to $200 on average for the year. It’s a small price to pay to insure against accidents caused by you or by your neighbors.
4. Disability Insurance
If you’re employed, there’s a good chance that you have a disability insurance plan already. There are a lot of options for disability insurance, including employer group plans, supplemental plans, and short and long-term disability plans.
If your employer does provide some short or long term disability benefits, it’s probably not going to cover 100% of your income. If you have a supplemental policy, you’ll be paid for any time that you need to take off because of an injury or other ailment. It’s worth considering as open enrollment season is happening at many employers this month.
5. Flood and Earthquake Insurance
Flooding is one of the most common causes of property loss in the United States. If you live in an area that is subject to floods, you should have a visit with a local insurance agent or call the National Flood Insurance Program for more information on flood insurance policies provided in your area.
Earthquake insurance isn’t something that I’m concerned with because I live in the Midwest where earthquakes rarely happen. But for those who live on the west coast, you might look into getting an earthquake policy. Unfortunately, these policies can get quite expensive if you live on the west coast, but earthquakes can be devastating. The 1994 Northridge earthquake near Los Angeles generated more than 195,000 claims averaging $35,000. If I lived on the coast, I would definitely shop around for earthquake insurance.
Do you have these insurance policies in place already? What other policies would you add to this list? Leave a comment below!