Some consumers think insurance is a waste of money, and they prefer to keep their money, invest it and pay out of pocket for everything from a broken arm to a dented bumper.
Many others might not like paying insurance premiums, but they wouldn’t be able to sleep at night if they left everything to chance. We’ll focus on five types of insurance that just about everyone may need at some point.
If you own a house, chances are it is your most valuable asset. Why wouldn’t you want to protect it? If your house is not paid off, the bank or company that gave you a loan will require you to have insurance, but some people who pay off their mortgages make the mistake of dropping their coverage. You should buy as much insurance to allow you to replace the house if it was destroyed, and you also might want to buy a policy that covers the contents. If you don’t own a house, you should buy contents coverage because your most valuable assets may be the contents of your apartments.
Health insurance should be viewed as a necessity for the vast majority of Americans, with the possible exception of those who receive Medicaid or Medicare. Only the richest of the rich can afford to pay out of pocket for medical expenses, which range from hundreds of dollars for routine doctor visits to thousands for more serious illnesses or broken bones. Premiums aren’t cheap, but not having health insurance can cost middle-class Americans way more than they can afford, including their homes and their savings.
If you’re single and you have no children, you can go without life insurance, but if anyone depends on you financially, you need life insurance. How much do you need? How much more money will you likely earn during the rest of your working years? Add that figure to what your funeral will cost, and that’s the minimum amount of coverage you should buy. Life insurance is more affordable than ever, but the best rates are for the youngest and healthiest, and when you apply, expect to undergo a thorough physical examination, which include blood and urine tests.
One in five Americans become disabled at some point, and most of those are disabled for three months or longer. If you become one of them, you can collect Social Security disability checks, but they won’t replace all of your income. Disability insurance fills the gap and makes even more sense if you have dependents. Buy it through your employer if you can.
Every state requires car owners to have some sort of car insurance, especially liability insurance. If you get in an accident and it’s your fault, the victims of your negligence can sue you and own everything you own. That doesn’t mean everyone needs comprehensive auto insurance. For example, if you drive a clunker, you probably don’t want collision insurance.
Whichever type of insurance you need, shop around, ask lots of questions and know what you’re buying.
Photo Credit: Alex E. Proimos