Part and parcel of being a grown-up means you are prepared for every eventuality. And as such, that means paying for things that you might not need but someday could come in useful. With the median household income for 2021 thought to be around $66,000, many households are thought to be bringing less than this; incomes are already stretched as it is, and the thought of paying for something you might not need might seem like just another drain on your finances.
One such expense that people should be maintaining is insurance policies. But with so many different policies in the market, exactly what type of insurance is essential for the average American household?
Health Insurance
Healthcare costs in the US are at an all-time high. And when the news regularly reports on people who are going without life-saving medication because they can’t afford it, healthcare insurance is a must for everyone. With co-payments rising, increased deductibles, and less coverage for your payments, it is no wonder that many people are struggling to justify the cost of health insurance.
But statistically, you are one hospital bill away from bankruptcy, meaning even the most minimal cover is better than none at all. The cheapest option is still to be insured via your employer; however, many small business owners do not offer this option meaning employees need to check with other organizations or trade associations to see if they are eligible for healthcare coverage via this option before looking at private healthcare options.
Families need to ensure they have some cover in place to afford trips to the Dr’s office for routine appointments for children and accidents. those with long term health conditions and illnesses need to make sure they keep on top of payments to provide uninterrupted coverage so you can attend hospital and fill prescriptions when you need them
Life Insurance
One of the main benefits of life insurance is that it will cover the cost of funeral expenses in the event of your death. This can be a huge relief for loved ones in what is the worst time of their lives. Being able to release the financial burden is one reason many people take out life insurance.
It is said that your policy should be 10 times your annual salary, but there are few Americans who can afford this for one adult, never mind for two parents. When choosing the level of cover you need for your life insurance, you need to factor in the expenses those left behind will be left with in the event of your death. Think mortgage payments, debts, auto payments, childcare costs, college funds, and so on. This will give you an idea of what type of coverage you need to insure yourself for.
It could be a better option to look into life insurance for married couples and whether or not it is best to choose from a whole life policy or a term life policy.
Auto Insurance
In 2019, 39,000 people lost their lives in an auto accident. 2018 saw over 6.7 million car accidents alone, making auto deaths one of the leading causes of death in the US each and every year.
You may think you are a good safe driver, and your car may have all the best safety features, however driving and being on the roads with other drivers can be unpredictable. No matter how good a driver you are, it would be best never to assume all drivers are safe drivers.
In the US, not all states require drivers to have auto insurance; however,r in the event of an accident, the financial burden of replacing your care, covering healthcare costs, and payments you could be liable for to other parties involved in the accident can quickly add up. Even if your state doesn’t require you to legally have an auto insurance policy, can you afford to drive without one? All it takes is a moment’s lapse in concentration, and before you know, you are involved in an accident?
If you are driving in a state that does require auto insurance and you don’t have any, the fines can be costly, upwards of $1,000, and you can also risk getting points on your license or even having it suspended. So if you rely on your car for work, family, or other reasons, you need to make sure you have auto insurance.
Home Insurance
There are different types of policies depending on whether or not you rent or own your own home. Homeowners’ insurance usually covers the whole building and, in many cases, the contents too. For renters, home insurance takes into account all of your possessions, and you are covered for what you own.
Can you afford to replace all of your belongings if they were damaged in a flood or fire? Or can you rebuild if your home was demolished due to a natural weather event without insurance? If the answer is no, this is an essential insurance premium you need to add to your expenses.
When taking out home insurance, make sure you read the small print and know exactly what isn’t covered. If you own your own home, does the cover include your contents and cover if you need to live somewhere else for any reason? Check the maximum cost for specific claims and make sure what is payable is what you expect.
For contents insurance, check for limits on both the policy after deductibles and limits on individual items. You may need to add a cover if you own high-value items that won’t be covered under your policy. Don’t forget. You can consult a public adjuster if your insurance company refuses to pay your full maximum value in the event of a claim. Insurance companies will try to pay as little as possible, and as such, you could be out of pocket if this happens.
Disability Insurance
Have you ever thought about what will happen if you are injured or unable to work? Few people will be able to survive on the loss of one income, and as such, it can be worth considering taking out disability insurance?
Long-term disability coverage is often offered by employers, as well as short-term viability coverage too. While you may have your savings accounts, your health insurance covering your medical bills, paying your day-to-day expenses if you are unable to work is still a huge burden for many people.
Disability coverage means you can still receive a lump sum of around 50-60% of your income. this will mean you still have money coming in even if you cannot work. Many insurers will consider factors such as age, lifestyle, and health when quoting for your coverage, and it will usually cost you around 1-3% of your income each month.
Like with other policies, there will be certain restrictions and payout levels depending on the severity of your injury and disability, but if you have ever lain awake at night wondering how your family will survive if you are unable to work, then you need long term disability cover.
Tips for Shopping for Insurance Policies
Reading the small print may seem like a chore; however, in the event of a claim, the last thing you want is any more nasty surprises.
- Who to what is covered exactly. Check what contents are excluded from home insurance policies and family members on health insurance plans or life insurance.
- Check policy limits. There will always be clauses and exclusion and make sure you are aware of them upfront can remove any nasty surprises in the event of a claim.
- Have proof. With more and more smartphones being used, it is easier than ever to document everything. Before pictures will help you to identify items you need to replace on your home, photos of your car in good condition and after an accident will help to assess the repairs needed,
- Claim limits and deductibles. What are you expected to cover as your co-payments on health insurance, and is there a limit on how many claims you can make in a specific timescale?
If you are ever unsure about what you an insurance policy cover, then always speak to an insurance agent to explain the working and terminology in full, so you know exactly what will happen in the event of a claim. This will help you remove any doubt that you are paying for a policy that covers your needs.
Try to avoid paying for the cheapest policy quote you are given and always investigate what exactly is being offered and what is expected of you before paying your premiums. If your finances are stretched, then considering moving your insurance carrier to a cheaper quote when your policy is due for renewal can help you to keep your coverage but find a cheaper price that is more affordable for your family.
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