Insurance: Don’t Leave Home Without the Essentials

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Insurance is the one thing nobody wants to pay for. It’s expensive and frankly, you’re not even sure you need it. Yet without proper coverage, you could be just one catastrophe away from bankruptcy. Here is a rundown of the basic types of insurance everybody should carry.

Property & Casualty

P&C insurance includes homeowners, renters, auto, and umbrella policies that protect your belongings and cover damage you cause to other people or their possessions.

Whether you rent or own, you’ll want to protect yourself against liability if somebody gets injured in your home, and to replace any assets lost because of fire, disaster, or burglary. Homeowners insurance is usually mandatory if you have a mortgage and also covers damage to the property due to accidents and natural disasters. Pay attention to the dwelling coverage on your policy, which should cover the cost of restoring your home if it gets destroyed. To make sure you have adequate coverage, look for a guaranteed replacement cost provision or extended dwelling coverage. These add-ons might increase your premium, but you’ll be grateful to have them if disaster strikes. Keep in mind that many policies exclude flood and earthquakes. Depending on the conditions in your area, this could be an expensive hole in your coverage.

If you drive, automobile insurance is another necessity. Nearly every state has its own minimum insurance requirements for drivers and automobile owners. Most states require that you at least carry liability insurance, which covers any injuries or property damage you inflict. While you may be tempted to skimp on coverage to lower your premium, you should get as much as you can afford. If you hurt someone, you’re not only on the hook for their medical bills, you can be sued for damages. Any medical or legal expenses above the maximum covered by your policy will be your responsibility to pay.

Collision coverage is the part that pays for damage to your vehicle. Every insurance company has their own method of determining the cost of repair or replacement, so be sure to review the terms of your policy before you actually need it. Comprehensive coverage covers damage to your vehicle not caused by a collision, such as theft, vandalism, or natural disaster. You may also want to include rental car insurance in your policy, which will absorb the cost of renting a car while your vehicle is out of commission.

Umbrella coverage is a catch-all policy that protects you above your existing home or auto insurance. If you have significant assets, this additional safeguard can limit your personal liability should you get sued.

Health/Medical Insurance

While health insurance is no longer mandated by law, it’s a precaution everybody should still have. Given the astronomical cost of health care, even an isolated illness or accident can lead to financial ruin. In fact, unaffordable medical expenses account for two-thirds of bankruptcies in America. If your employer does not offer health insurance, you can compare policies on the marketplace or contact insurance companies directly to find out what they can offer you. Low- and moderate-income Americans may also be eligible for premium tax credits that lower the monthly cost of their plan. 

Long-term Disability

According to a 2017 study by the Social Security Administration, a quarter of people will experience some kind of disability that prevents them from working temporarily. It’s more common than you think. For example, pregnancy-related complications could mean doctor-ordered bed rest. In order to collect unemployment benefits, you typically must be willing and able to accept work. If your employer does not offer paid maternity leave, you could be looking at weeks or months of missed income.

If you have a dangerous job, your employer may already offer this insurance on your behalf. However, anybody can benefit from protecting their salary.

Life

Life insurance is critically important if you have dependents. If you pass on, the policy can pay off debt, replace your income temporarily, and cover funeral costs.

There are two kinds of life insurance. Term life policies cover a set period of time. Permanent policies endure as long as you continue to pay the premium, and builds cash value you can eventually borrow against.

The point of life insurance is to guard against leaving a bad situation for loved ones if we die unexpectedly. For most people, a term life insurance will protect their families through their prime earning years, when you likely have debt, children to support, and other obligations.

Many employers offer life insurance for their employees as part of a group plan. That coverage typically ends when you leave. You may be able to port the insurance policy to your current company, or change it to an individual policy and pay the premiums yourself. This could be a valuable option if you do not qualify for life insurance otherwise.

Long-term Care

If you are still decades from retirement, long-term care is likely the last thing you’re thinking about. If you wait too long however, you may lose the chance to get it at all. This would be a mistake, since long-term care expenses are not covered by Medicare. Experts recommend that you get a policy no later than your 50’s so you can lock in a lower premium.

Identity Theft

You have many options available. For starters, one of the best ways to keep criminals from accessing and misusing your financial data is through credit freezes. Also known as a security freeze, a credit freeze, once in place, makes your credit reports inaccessible to everyone but you, current creditors & debt collectors. It’s now free to place and lift freezes will all three bureaus.

Identity theft companies typically offer services that include credit monitoring, alerts recovery for a few hundred dollars a year. However, before enrolling in such a service, check with your local bank or credit union since its not uncommon for them to offer similar services at discounted rates for their customers and members.

In addition, most credit cards these days have a zero-liability policy that protects you from fraudulent charges. However, these won’t cover legal fees and other costs associated with restoring your good name.

Lastly, if identity theft protection is not wrapped into your homeowners insurance, you can typically add it on as an inexpensive rider. Not all identity theft policies are created equal, however. At the very least, the policy should pay for legal fees, late fees, and provide a specialist to help straighten out your situation (recovery).

Don’t underestimate the importance of proper coverage. Insurance policies are like the airbags in your car. You hope you never need them, b