What Insurance Do You Really Need?


How Much Do You Really Need?

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Insurance. It’s one of those words that tends to make people groan, roll their eyes or tune out altogether. You know you need some insurance, but which kinds and how much? It can seem like a guessing game, and a depressing one. (Who wants to think about needing disability or flood insurance?) 

Add to that all the confusing industry jargon, bombardment of media ads and questionable sales practices of many insurance agents, and it’s not a surprise to me that so many people end up opting out of insurance they actually need.

So we’ve combed through all the many types of insurance out there to break it down for you: what you need, what you don’t need, and how to get it for the best price. Trust us. Taking five minutes to read it now can save you a lot more time (and unnecessary expenses) down the road. Having the right insurances in place create the foundation for a solid financial plan to achieve your goals and build wealth. Without them, your financial future is just a house of cards that can crumble when you least expect it. 

Worth It: Health Insurance

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The soaring cost of medical care is reason enough to make health insurance a necessity, not to mention Obamacare, which goes into effect next year and will require it. Even a simple visit to the family doctor can end up costing over $100 and extended hospital stays and surgeries can easily rack up a bill in the thousands. Although the ever-increasing cost of health insurance is a hard pill for nearly everyone to swallow, the potential cost of not having coverage is significantly higher.

Some insurance plans offer basic coverage to cover you in case of a major accident or illness. These insurance plans typically have a lower monthly premium than plans with more comprehensive coverage, and may be appropriate if you expect to use your insurance sparingly. Other plans offer more coverage but keep monthly payments low by requiring higher deductibles. If you opt for this type of plan, it is important that you make saving funds in a tax-advantaged health savings account (HSA) a priority and, ideally, set up an automatic deduction from your paycheck or checking account to the HSA on a regular basis. Other, more robust insurance plans offer additional coverage including sick and specialist office visits. These insurance plans typically have a higher monthly premium and lower deductible, and may be appropriate if you have a chronic condition, are a hypochondriac, or have young kids on the plan. To shop for health insurance quotes and get more information on Obamacare and what it means for you, click here.

Worth It: Automobile Insurance

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Most states require automobile insurance of some kind. Even if it is not required and you happen to be driving a two-wheeler or rusting tin can on its last legs--er, wheels--not having a decent vehicle insurance policy is way too risky. If you’re involved in an accident and someone is injured or their car is damaged, you could be subject to a lawsuit that could cost you much more than your car did. Having no auto insurance or purchasing only minimum coverage can save you money in the short term, but with the chances of getting into an accident so high (especially if you drive a motorcycle or scooter) and our lawsuit crazy culture, the risk is not worth it.  

The are several factors to consider when structuring a suitable auto insurance policy, including your budget, net worth, whether or not you are leasing or financing your vehicle, your health insurance coverage, area of residence, and driving history and habits. The good news is that bundling your auto insurance with other insurances from the same company can often save you money. However, that doesn’t necessarily mean that you’re getting the best deal out there so it is still a good idea to shop around first. To compare quotes for auto insurance and get more information, click here

Worth It: Homeowners Insurance

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Replacing your home and precious possessions in the event of a fire, flood or other natural disaster is an expensive proposition, not to mention emotionally devastating. Having adequate homeowners or renter’s insurance can make the process less difficult and needs to be an important consideration when buying or renting a home and budgeting for housing expenses. When shopping for a policy, look for one that covers replacement of the structure and the contents in addition to the cost of living somewhere else while your home is repaired. 

For homeowners, keep in mind that the cost of rebuilding doesn't need to include the cost of the land, since you already own it. Depending on the age of your home and value of what’s inside, the cost to replace it could be more or less than what you paid for it. To get an accurate estimate, find out how much local builders charge per square foot and multiply that number by your home’s square footage. Don't forget to factor in the cost of upgrades and special features. Also, be sure the policy provides adequate coverage for the cost of any liability for injuries that might occur on your property, or consider getting a supplemental umbrella policy. To shop for homeowner’s and renter’s insurance quotes, click here.

Worth It: Long-Term Disability Insurance

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Your ability to work and earn income could be your most valuable asset. So it’s critical that you insure it with enough disability insurance (DI). DI policies are designed to cover no more than 60-80 percent of your income and help you pay for recurring monthly expenses when you can’t work. Many companies offer disability insurance to employees for free or at a discounted rate, but group DI policies have their limitations, which can include lack of long-term coverage and portability, and capped and taxed benefits. If you are the breadwinner in your relationship or your family relies on your income, it is important to budget for and invest in an individual long-term DI policy that can maximize your income replacement. To get an idea of cost, you can get a quick online quote here.

Worth It: Life Insurance

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If you died unexpectedly or prematurely, think about what impact that could have on your family. Besides the burden of burial costs, the added emotional toll and financial stress of outstanding debts and unachieved goals could be crippling. If you are currently paying off a mortgage and/or student loans, or have young children or other dependents, life insurance should be high on your list of policies to have. There are several different kinds of life insurance, but the most basic and affordable kind is term life insurance, which offers pure coverage without any cash value component. 

Term policies are most commonly purchased in 10, 15, 20 and 30-year increments. Many policies are able to be converted to permanent insurance without evidence of insurability in the future when cost might be less of an issue, which may be of interest for estate planning purposes. To determine a suitable amount of coverage, you should consider what debts you would want to eliminate, what future goals you would want to cover (like college savings for your kids), and how much supplemental income you would want to provide to your surviving spouse and for how long. To help you calculate how much life insurance you need, get more information on your options and shop around, click here

Worth It: Business Insurance

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It’s especially important for entrepreneurs to carefully consider their business insurance needs since they may have more personal financial exposure in the event of loss. Adequate business liability coverage could be the difference between a successful venture and bankruptcy. 

Business insurance can help protect owners by providing coverage for property damage, legal liability and employee-related risks. The extent of risk varies by company, so if you are a business owner and aren’t sure how to assess your business’ coverage needs, you should consult a reputable, experienced and licensed insurance broker. Ask your fellow entrepreneurs for referrals and interview a few of them until you find one you feel comfortable with and trust. You can also obtain a list of licensed agents in your area through your state's department of insurance or the National Association of Insurance Commissioners. You can also shop for quotes yourself and access more information and small business resources by clicking here


Might Be Worth It: Long-Term Care Insurance

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Long-Term Care Insurance (LTC) is one of the most debated types of insurance. Many financial advisors think that it is an absolute necessity while others think that it is not worth the cost and suggest other, cheaper ways to save for potential long term care costs. According to the American Association for Long-Term Care Insurance, the odds of needing long-term care is 68 percent for people age 65 and older. The pros of LTC are that it can allow you to maintain your independence, stay in the comfort of your own home, and reduces the financial and emotional stress that a long-term care need typically causes a family. The cons are the relatively high cost of the premiums. 

However, given the ever-increasing cost of healthcare and longevity of people, LTC can be a sensible investment, if you can afford it. You also should consider your family’s medical history, your projected net worth, and your feelings about possibly ending up in a government-run facility or a dependent on your relatives in the event a long-term care need drained your assets. Whether you buy LTC or not, you should have a conversation with your loved ones about the facts on long-term care in the U.S. today and make preparing for it an important component of your and their overall financial plan. To get an idea of LTC costs and for more information, click here

The Types of Insurance You Don’t Need

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Fear sells insurance. Insurance companies know this well and capitalize on it by offering us nearly every kind of insurance under the sun. While it’s generally better to be safe than sorry, over-insuring yourself can be unnecessarily time-consuming and costly. As long as you have or plan to have the previously mentioned policies in place, in most cases you can spare yourself valuable time and money by foregoing these additional types of insurance:

  • Disease Insurance
  • Accidental Death Insurance
  • Extended Warranties
  • Private Mortgage Insurance
  • Rental Car Insurance
  • Travel Insurance
  • Life Insurance for Children
  • Credit Card Insurance
  • Mortgage Life Insurance
  • Unemployment Insurance

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