5 Types of Insurance Everyone Should Consider
Do You Have the Right Protections for Your Family and Your Assets?
Determining which types of insurance you may need isn’t always a straightforward process. Knowing that you want to protect yourself, your family, and your assets is a great first step—but where should you go from there? Having the right types of insurance can help you safeguard your prized possessions and secure your earning power for as long as possible.
No one wants to think about what could happen to them if catastrophe strikes, but that’s exactly what insurance is for. It certainly isn’t an inevitability that bad things are in your future, but when you have the right types of insurance, you are investing in your own peace of mind.
In order to determine the right path forward and exactly which pitfalls to prepare for, read on to get the information you need about the five important types of insurance available today.
1. Long-Term Disability Insurance
The prospect of long-term disability insurance (LTD) is a bit scary. After all, none of us want to believe we may not be able to continue living the way we always have, in good health and with independence. This is why many people choose to ignore LTD altogether. It’s great to be hopeful about the future, but hope is not a strategy when it comes to protecting your future earning potential.
A safer bet, no matter how frightening it may be to confront, is to prepare. You can do so by choosing a disability insurance policy that provides enough coverage to let you and your family maintain your current lifestyle in the event you can no longer continue working.
Long-term disability insurance works by giving you a portion of your salary (usually a percentage, such as 60% or 70%) if you are unable to work. To receive these benefits, you’ll typically need to have concluded short-term disability, and potentially also a mandatory waiting period.
Long-term disability policies break down disabilities as “any occupation” or “own occupation.” Own occupation means that due to a disability, you’re unable to perform your regular job or a similar job. Any occupation means that you as the insured have a disability that prevents you from performing any job that you’d otherwise be qualified for.
There are some similarities between long-term disability insurance and workers’ compensation, which helps to cover lost pay after work-related injuries and the cost of any medical expenses. States often require employers to have workers’ compensation insurance for all their employees, with the understanding that employees cannot then sue for negligence if they are injured on the job.
The biggest difference between workers’ compensation and long-term disability insurance is that LTD isn’t limited to injuries or disabilities that occur while at work.
2. Life Insurance
I know, I know – you’ve heard this one before. However, life insurance is sometimes a tough concept for people to tackle and I think it’s worth discussing. Life insurance does what it sounds like—insures your life—but it does so in order to protect the people who depend on you financially. It can be intimidating to plan for what could happen when you pass away, but if anyone you love—parents, children, a spouse—would face financial hardship when you die, it’s worth considering a life insurance policy.
A good place to start is to purchase a policy that can provide the equivalent of how much you earn a year, multiplied by the number of years you plan to remain employed. Your policy should cover that amount, as well as big end-of-life expenses like burial costs. After that, consider whether you would leave behind any large debts that you hope your life insurance could pay off for your family, and purchase a policy large enough to cover all those needs.
3. Health Insurance
If you feel healthy, you may not think of good health insurance as critical. However, with the increasingly high cost of medical care and medication, health insurance is a necessity no matter how fit you may feel that you are. Even a simple visit to a family physician can rack up a hefty medical bill, not to mention more serious injuries or illnesses that can cost much more than expected. An extended hospital stay or surgery, for example, can easily come with a five-figure price tag.
Unfortunately, health insurance itself is often very costly, whether you purchase it directly or through an employer. It can be tempting to choose a cheaper policy that doesn’t really suit your needs or to forgo insurance altogether to save money. But remember—the potential cost of not having coverage could, in fact, be much higher.
4. Homeowner’s Insurance
Owning a home comes with a lot of benefits – and a lot of responsibilities. If anything happens to your house, homeowner’s insurance can help protect you and make the process of replacing your home a lot less difficult and expensive.
When you’re looking for the right policy, consider this key tip: make sure it covers both the replacement of the structure itself and the contents of your home. If you can find a policy that also covers the cost of living elsewhere during home repairs, that’s ideal.
Depending on your home’s location, age, and amenities, the cost to replace it could differ from the price you originally paid for it. To get an estimate that makes good sense, research how much builders in your area charge per square foot and multiply that by the square footage of your home. You’ll want to build in other buffer costs like any special features or upgrades. Getting a good policy makes a difference when the unexpected happens.
A Note on Renter’s Insurance
If you rent rather than own, you’ll want to consider rental insurance, which can help provide coverage for personal belongings, living expenses, and any liability in the event of a loss. The owner of the home you rent from likely will have homeowner’s insurance but, unfortunately, that doesn’t cover you as the tenant. Rental insurance for lessees can help protect you if something should happen to your rented home and any belongings in it.
5. Automobile Insurance
In most places, automobile insurance is mandatory and a matter of law. There are a few places where it’s not mandated, but even then, it pays to have your vehicle covered. Having no automobile insurance, or even minimal automobile insurance, can put you at unnecessary financial risk in the event of an accident. If you’re subject to a lawsuit, someone is injured, or their property is damaged, costs can be astronomical.
Types of Insurance: The Bottom Line
You can’t prevent life from happening—but you can protect yourself, your family, and your assets. Losses happen, but insurance can lessen the burden by helping you cope financially.
If you’d like to discuss the specific types of insurance that may afford you greater protection and peace of mind, give us a call today. At Paces Ferry, we know you’ve worked hard for what you have, and we can help you develop all aspects of your financial plan to help you preserve your assets, build your wealth, and achieve your goals. We look forward to hearing from you!
Paces Ferry Wealth Advisors, LLC is a registered investment advisor with the U.S. Securities and Exchange Commission (“SEC”). This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor.