Auto, health and home insurance are commonly the only types of insurance policies many people have. However, in order to adequately protect yourself and your future income, there are several other types of insurance that you should want to consider.
We'll go over them but first, let's talk about the importance of insurance in general.
Why is it important to have different types of insurance?
Having the right insurance can potentially save you a ton of money in the event of an emergency, unplanned life occurrence or a medical need. It means you can protect yourself without having to impact your long term financial plans. On the flip side, not having adequate insurance can derail your financial goals and you definitely don't want that.
"Not having adequate insurance can derail your financial goals."
One thing to keep in mind before signing up for any additional insurance coverage and adding new premium payments to your budget is to make sure the coverage makes sense for your current life situation. You also want to make sure that the additional monthly costs are justifiable. You don't want to be making monthly payments for insurance coverage if you don't necessarily have a need for it.
5 insurance policies you need to have other than health, auto & home insurance
1. Life insurance
Life insurance is something to consider if you have other people who depend on your income. For instance, a spouse or children. Or if you have large financial commitments such as a mortgage, child education expenses or any major debt. The purpose of life insurance to provide a lump sum payment to your dependents in the event of your death. How much life insurance you buy depends on the number of years of income you want to cover.
The different types of life insurance
- Term life insurance
This is where you pay an annual premium and in the event of your death, your beneficiaries get paid a lump sum. It's important to know that term life, as the name indicates, only covers you for a specific term or number of years.
- Whole life insurance
This coverage lasts your entire lifetime as long as you keep up with your premium payments. It may also offer benefits like a form of savings or investment account associated with it. Over time you may get money credited to you. While this type of life insurance sounds attractive it is also more expensive so you'll want to keep that in mind.
Regardless of what type of life insurance you choose, you want to make sure you fully understand what is associated with each, how much coverage the premium provides and if there are any conditions or requirements.
2. Long Term Disability Insurance
This insurance covers you by replacing your income if you are unable to work due to a permanent or temporary disability. Regardless of whether you have dependents or not, if you have monthly living expenses then it's a good idea to consider getting disability insurance.
What about short-term disability insurance? Well, if you have a fully funded emergency fund then it could cover you if you cannot work. That being said adding on short-term disability might not be a bad idea depending on the cost. It can help you keep your emergency savings intact in exchange for the monthly premium you pay for coverage.
3. Renters Insurance
If you are renting your home, you are not responsible for the actual building or for major repairs. That being said, you definitely want to consider getting renters insurance to cover your valuables within your home. This protects you in the event that they ever get damaged by flooding, fire or other types of disasters or in the event that your home is broken into. Things like your electronics and other valuables are the things that your renters' insurance would cover.
4. Personal Article Insurance
Got an expensive engagement ring or wedding ring set? An expensive watch? A laptop you take with you everywhere? The costs of replacing items like this can be really expensive. So if you have any personal items that are of value and you often have them outside of your home, you should definitely consider insuring them through a personal articles policy. This will ensure that in the event they get lost or stolen, you can replace them without having to incur any major financial setbacks.
5. Pet Insurance
This can save you a lot of money if your pet needs major surgery or will have expensive medical care. A lot of times when people get pets, they don't always consider the associated medical costs. One thing to keep in mind is that as your pet gets older, the more medical attention they might need. As a result, pet insurance is definitely something to consider.
You want to make sure that whatever additional insurance coverage you get makes sense for your life situation and that monthly cost of coverage fits into your budget. You also want to make sure that the potential payout from an insurance policy far outweighs the cost you'll be paying to have the coverage over time.