Insurance is intended to protect us, at least financially, if certain events occur.
However, numerous insurance options are available, and many financial experts believe you should have them all. It can be challenging to determine what type of insurance you require
Your specific situation always determines the right type and amount of insurance to
purchase. When constructing your insurance portfolio, consider children, age, lifestyle, and employment benefits.
However, most financial experts recommend that we all have four types of insurance: life, health, auto, and long-term disability.
1. Life Insurance
The ability to cover your funeral expenses and provide for those you leave behind is one of
the essential advantages of life insurance. This is especially important if you
have a family that relies on your income to make ends meet.
According to industry experts, you should have a life insurance policy covering ten times
your annual income. However, that is a figure that not everyone can afford.
Remember to include funeral costs and daily living expenses when calculating the amount of life insurance coverage you require. Examples are mortgage payments, outstanding loans, credit card debt, taxes, child care, and future college costs.
More than half of U.S. households rely on dual incomes, according to a 2021 study by
LIMRA, formerly known as the Life Insurance and Market Research Association. The study also discovered that a quarter of families would face financial hardship within one month of the death of a wage earner.
Traditional whole life insurance and term life insurance are the two basic types of life
insurance. Full life insurance can be used as an income tool and an insurance instrument. Whole life insurance covers you until you die as long as you pay the monthly premiums.
On the other hand, term life insurance is a policy that covers you for a specific time.
There are other significant differences between the two types of insurance, so you should consult with a financial expert before deciding which is best for you. Consider your age, occupation, and the number of dependent children.
2. Health Insurance
According to a 2019 study published in the American Journal of Public Health, you and your family are statistically only one serious illness away from bankruptcy.
Two out of every three bankruptcies were caused by medical problems, according to the
Journal's survey of more than 900 Americans who filed for personal bankruptcy between 2013 and 2016.
Those figures should persuade you to get health insurance or to review and possibly
increase your current coverage. However, with rising co-payments, higher deductibles, and fewer coverage options, health insurance has become a luxury that fewer and fewer people can afford.
Considering that the national average cost for one day in the hospital in 2019 was $2,607,
even a bare-bones policy is preferable to none.
Participating in your employer's insurance program may be the best and least expensive
option, but many smaller businesses do not provide this benefit.
According to Kaiser Family Foundation research, the average annual premium cost to an employee in an employer-sponsored health care program in 2021 was $7,739 for single
coverage and $22,221 for a family plan.
If you do not have health insurance through your employer, inquire about group health
coverage through trade organizations or associations. If that isn't an option,
you'll have to purchase private health insurance.
3. Insurance for Long-Term Disability
Long-term disability insurance is the one type of insurance that most people believe they
will never require.
Nonetheless, according to Social Security Administration statistics, one in every four workers entering the labor force will become disabled and unable to work before retiring.
Even workers with excellent health insurance, a nice nest egg, and a good life insurance
policy frequently fail to plan for the day when they may be unable to work for weeks, months, or ever again.
While health insurance covers hospitalization and medical bills, you are still responsible for the day-to-day expenses that your paycheck covers typically.
As part of their benefits package, many employers provide both short- and long-term
disability insurance.
This would be the best option for obtaining low-cost disability coverage. If your employer does not offer a long-term range, consider the following factors before purchasing insurance on your own.
It is best to have a policy that guarantees income replacement. Typically, policies payout
between 40% and 70% of your income.
Disability insurance premiums are determined by various factors, including age, lifestyle, and health. The average cost ranges from 1% to 3% of your annual salary.
But, before you buy, make sure you read the fine print. Many plans have a three-month
waiting period before coverage begins, a three-year maximum coverage period, and some significant policy exclusions.
Automobile Insurance
According to the National Highway Traffic Safety Administration, 5.25 million police-reported car accidents in the United States in 2020. In 2020 alone, an estimated 38,824 people died in car accidents.
According to the CDC, automobile accidents are one of the leading causes of death in the
United States and around the world.
In the United States, in 2020, nearly 2.3 million drivers and passengers will be injured. In 2019, the economic costs of fatal car accidents in the United States were around $56 billion.
While not all states require drivers to have auto insurance, most of them do have laws
governing financial responsibility in the event of an accident. States that require insurance regularly conduct random checks on drivers for proof of insurance.
If you do not have coverage, the fines vary by state and range from license suspension to points on your driving record to fines ranging from $500 to $1,000.
Fines are likely to be the least of your financial burden if you drive without auto insurance and are involved in an accident. Suppose you, a passenger, or the other driver are injured in an accident. In that case, auto insurance will cover your expenses and protect you from any litigation that may arise due to the accident.
If you have auto insurance, your vehicle is also protected against theft, vandalism, and natural disasters such as hurricanes and other weather-related incidents.
Again, as with all insurance, the cost of auto insurance is determined by your circumstances. Compare several rate quotes and the coverage provided to ensure you get the
right insurance. Check periodically to see if you qualify for lower rates based on your age, driving record, or the area where you live.
In conclusion
Most experts agree that the four types of insurance you must have are life, health, long-term disability, and auto insurance. Always check with your employer first to see any available coverage. Get quotes from several insurance companies if your employer does not provide the type of insurance you require.
Those who offer a range in multiple areas may offer discounts if you buy more than one type of coverage. While insurance is costly, the alternative could be far more costly.
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