5 Insurance Policies You Didn’t Know You Needed

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Types of insurance

Most people are familiar with insurance. Are you a car owner? Then you know you need to carry coverage to be on the road. Ever borrow money to buy a home? Your lender likely required you get homeowner's insurance to protect this big purchase.

While these may seem like enough, the truth is there are five other types of insurance that you should consider in order to adequately protect yourself and future income.

We'll go over them, but first, let's talk about why insurance is so important. 

Why is it important to have insurance coverage?

Think of insurance as protection for your wallet.

Having the right coverage can potentially save you a ton of money in the event of an emergency, unplanned life occurrence, or a medical need. Car insurance can pay for the costs of a car wreck, like repairs and medical bills. A homeowner's policy can help you rebuild your home after a devastating fire. Health insurance can pay for expensive emergency room bills after an injury or illness. 

In exchange for paying money (premiums) to an insurance company, you get coverage. It means you can protect yourself without having to impact your long term financial plans. Not having enough insurance can derail your financial goals, and you definitely don't want that.

Before you start signing up for any additional insurance coverage and adding new premium payments to your budget, you need to make sure that the coverage makes sense for your 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.

Since most people already have auto and homeowner's insurance, we won’t try to convince you of why you need that. Instead, here are five additional types of insurance you may need — and that you might not have considered otherwise.

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. Sometimes you even need one if you’re getting a small business loan

The purpose of life insurance to provide a lump sum (and usually tax-free) payment to your dependents in the event of your death. How much life insurance you buy is a personal decision, but generally speaking, it depends on the number of years of income you want to cover for your household after you’ve passed away.

The two most popular insurance products you’ll come across are term life and whole life:

Term life insurance

Term life, as the name indicates, only covers you for a specific term or a number of years (e.g. 10, 20, or 30 years). As long as you pay your premiums and keep your policy active, your beneficiaries should get a lump sum in the event of your death. 

If you outlive your policy term, the coverage expires and you can either renew (if offered) or apply for a new policy. The premiums can be affordable, but they get more expensive as you get older.

 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 substantially more expensive. Here are some sample rates to compare. 

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’re 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 can’t work for a little while. However, adding on short-term disability might not be a bad idea depending on the cost — especially if your employer offers it at a low cost or free. It can help you keep your emergency savings intact in exchange for the monthly premium you pay for coverage.

3. Renters Insurance

If you’re renting, you’re not responsible for the building itself or major repairs. That’s your landlord’s responsibility. That being said, you definitely want to consider getting renters insurance to cover your valuables within your home.

Renters insurance protects you in the event that your belongings get damaged by flooding, fire, or in the event that your home is broken into. This is also why it’s a good idea to keep an inventory of your stuff — like your expensive electronics or musical instruments — to know how much protection you actually need so you’re not overpaying.

Your electronics and other valuables are the things that your renters' insurance would cover. Renters insurance also covers items stolen from your vehicle, even if it’s parked away from home.

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. You may even be able to add a floater to an existing policy to cover valuables like jewelry (ask your renters or homeowners insurance company). 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

60% of Americans have a pet of some kind, and many times people don’t consider the associated medical costs with bringing home a pet. Pet parents should expect at least one $2,000 to $4,000 emergency vet bill during their pet’s lifetime, according to the ASPCA.

Pet insurance can save you a lot of money if your pet needs major surgery or has expensive medical care, so it is definitely something to consider. Talk to your vet to see which policies are accepted at their office before buying any coverage.

Choose what’s best for your situation

Bottom line: Make sure that whatever additional insurance coverage you get makes sense for your life situation and that monthly cost for coverage fits into your budget. The potential payout from an insurance policy should far outweigh the cost you'll be paying to have the coverage over time.

{Updated by Cristy S. Lynch}

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