Ugh. Insurance. Here to ruin everyone’s day by making your stuff more expensive. But as annoying as paying for insurance is, it is critical to have to protect yourself from devastating financial loss.
Ugh. Insurance. Here to ruin everyone’s day by making your stuff more expensive. As annoying as paying for insurance is, it is critical to have to protect yourself from devastating financial loss. What is insurance? The official definition of insurance is “a contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company.” Basically, you pay an insurance company a premium and they will pay (or reimburse) you for losses you incur that are covered by the policy. We’ll run through the most important types of insurance you should have.
First, you should have health insurance. Most employers provide some kind of health insurance for their employees. If your employer doesn’t provide coverage, research how you can get coverage on your own. Health insurance will not only cover your yearly check-up and if you get ill or injured, it will help mitigate the costs associated with your treatment. Make sure you’re familiar with the following terms:
It’s important to note that all of the items above reset at the beginning of your policy year. If your policy period starts on 1/1, any amounts applied toward your deductible and out of pocket maximum will reset after 12/31 of that year.
If you own a car, it’s against the law to not carry auto insurance in most states. There are state required minimum liability limits and your insurance company won’t offer limits lower than your state’s requirement. When looking at auto insurance limits, you should be familiar with these terms:
There are other coverages you can add, such as rental reimbursement if your car is undrivable due to a covered loss, roadside assistance, medical payments to cover others’ medical costs, and GAP coverage to cover if your car is totaled and is worth less than you owe on it.
Most lease agreements and every mortgage will require renters and homeowners insurance, respectively. These coverages provide liability coverage should someone get injured on your property, as well as coverage for your personal property inside. Homeowners insurance also covers the building (renters insurance doesn’t cover this as you don’t own the actual structure).
If you live in flood or earthquake prone areas, you can consider insurance for those as well. They can be pricey for not very much coverage, so weigh your options carefully.
If you have anyone who is dependent upon you financially, you should definitely consider term life insurance. Term life is an affordable way to cover your debts (mortgage, student loans, car loans, etc.) should you pass away, so your loved ones won’t be caught with financial burdens.
An umbrella policy covers you in case you’re liable for damages that exceed your liability coverages on your auto or renters/homeowners policy. It’s relatively inexpensive so it may be worth protecting your savings, home, future earnings, etc.
There are other types of insurance (disability, long term care, pet, etc.), but these are the types that should be first priority. Beware of coverages you don’t need or are not a good investment (accidental death, whole/variable life, etc.). These policies usually serve the agent getting commissions more than the good they’ll do you.
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