While it is possible to obtain insurance for nearly anything these days, there are certain policies that every responsible person needs to protect themselves. There are also a number of policies that are not suitable for everyone and may actually end up costing you.
Particularly under the financial constraints faced by many as a result of the economic slowdown that began in 2008, there is a temptation to cut back to lower your expenses by decreasing what you spend on life insurance, health insurance, property insurance, or auto insurance. Even when times are tight, maintaining quality coverage in each of the above areas is critical because we can’t predict the future and it just takes one accident or sickness to create what could be a lifelong financial crisis.
Life Insurance
This type of policy is the most often overlooked and can be the most critical when needed. While nobody wants to think about their own mortality, the reality is that people experience unforeseen premature deaths regularly. When such a tragedy occurs and the deceased does not have life insurance, the financial burdens that are created for those left behind compounds the devastation. Funeral arrangements alone can be quite expensive, but the lost income is the source of the real hardship, particularly if the deceased was the primary breadwinner. Losing that income could devastate your spouse or kids.
While there is debate about when one should obtain coverage, the latest you should wait to buy life insurance is when you have children. Providing for your children in case of death is crucial to ensure they will be cared for if tragedy strikes. For others, if one half of a couple is responsible for the bulk of the financial responsibilities, that is when that individual should obtain coverage. The next step is to then find out how much life insurance you need.
People often assume that if you’re young and single that life insurance is a waste. This isn’t entirely true. While it’s true that it isn’t as important to have coverage if nobody relies on your income, the other consideration is the cost of obtaining insurance at a young age. The younger and healthier you are, the less insurance will cost and the easier it will be to get. So even if you’re single and 25, if you think that getting married and starting a family will be in your future, it might be worth locking in coverage at today’s rates while you’re young and healthy.
Health Insurance
The views on health insurance are as diverse as the population, particularly given the rampant politicization of the subject. For many individuals, obtaining health insurance is directly tied to their employment. The options offered by the employer usually end up being the only real option because private insurance can be very expensive. Even in this context, it is important to ensure that you have comprehensive coverage.
Many people take the attitude that if they do not have access to insurance through an employer, the cost is too high to even consider getting insured. This group understands that even basic emergency care can run into the thousands if they become seriously ill injured. As emergencies rooms do not turn any away, these individuals take the risk that they will either “worry about the bill later” or that they will simply not pay it. The problem with this approach is that the financial repercussions of an unpaid medical bill can be severe. The cost of insurance premiums for basic coverage is relatively manageable when compared to the negative consequences of needing care without insurance.
To be sure, if you’re unemployed or underemployed, finding room in the budget for health insurance premiums seems like an impossible burden. It is still worth shopping around to see what’s available, especially if you or your family it in a high risk situation when it comes to health. At the very least, if you must go without insurance, it’s vital that you at least take part in preventative care. Seek out clinics that treat the uninsured and get your regular checkups and exams.
Property Insurance
For all but the wealthiest individuals, a house is probably the single most valuable asset that they own. Protecting that asset means obtaining comprehensive property insurance that covers both internally and externally originating problems. This means your policy needs to cover fires that are a result of old wiring within the home as well as fires that may be caused by lightning or a fire that spreads from a neighbor’s house. Likewise, a comprehensive policy will protect against water damage resulting from a frozen pipe and damage done by a burglar breaking into the home.
One of the appealing features of most homeowner’s policies is that it is relatively inexpensive to add riders for specific pieces of personal property. For example if you own expensive jewelry or artwork, these items can be covered by the homeowner’s policy for a nominal additional fee. It is important to add these items because they are not automatically covered. Also, if you have a lot of valuable electronics or equipment for a business that you run out of your home, talk to your agent to make sure you are properly covered. If you aren’t, you could find that if disaster strikes you end up only having enough coverage to rebuild the home, not replace the tens of thousands worth of personal items.
Here are a few tips to help you save on homeowners insurance.
Auto Insurance
This is the type of insurance subject to the greatest variability in cost. While the cost of auto insurance is largely driven by your driving record, it is still important to do some price comparisons before settling on a provider. Even after this is accomplished, checking every few years is advisable. While many people believe the most important part of auto insurance is its ability to repair the car or the car of the other driver in the case of an accident, it is actually the liability protection it offers that is most critical. In an auto accident in which one is at fault, the greatest liability comes from the injured drivers’ medical bills or a potential wrongful death suit. Making sure you have coverage through a good company and have enough liability coverage makes all the difference in the world.
Even when facing financial pressures, maintaining each of the above types of insurance is critical. Creating a sound financial plan is more than cutting spending and saving money. Insuring everything that you’ve worked so hard for, that can be taken away in a blink of an eye, is just as important.
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.
