Written by: Danny Kofke, Motivational Mentor
Most people already have some understanding of insurance. According to the latest data, roughly 91% of the U.S. population has some form of healthcare coverage through private insurance, Medicare, Medicaid, TRICARE, or VA Care. Therefore, if you are reading this, there is a high probability that you already have health insurance. However, once we move beyond health insurance — by far the most important type of insurance you can acquire — many individuals struggle to know what insurance they need.
6 Types of Insurance to Consider
In addition to health insurance, there are a few important types of insurance to consider for you and your family. While not all of these policies may be beneficial or relevant to you, they can help the vast majority of people reduce risk and have greater financial protection going forward. Like with most financial matters, you will have to evaluate your need for different kinds of insurance based on your finances, age, assets, and life circumstances to see which types of insurance fit you best.
Home or Renter’s Insurance
Whether you own a dwelling (house, condo, or apartment) or you rent your housing, you should have some form of insurance to protect against accidents or damages. The level of coverage you need will vary based on the value of the property, as well as the possessions on your property. If you want extra coverage for specific things like pieces of art or jewelry, many providers will allow you to pay for “riders” (add-ons) that offer you even more comprehensive coverage.
In most states, basic auto collision and liability insurance is a legal requirement for car owners. However, you can protect yourself even further by adding uninsured or underinsured motorist coverage, which ensures that, in the event of a collision with another driver, your repairs will be covered even if they do not have sufficient insurance. In any case, auto insurance is not just a necessity for legal reasons. There is always a risk of having a collision when you get on the road, and acquiring auto insurance greatly reduces the risk of a small accident turning into a financial disaster.
As the name implies, disability insurance provides financial protection in the event that you are injured or otherwise unable to work due to a disability. This is essentially paycheck insurance, as it guarantees that you will continue to have an income even though you cannot work. The exact amount you will receive depends on where you live, as well as your provider, but most people can get roughly 60% of their paycheck via disability coverage.
Life insurance can be an extremely important coverage to get, though it still depends on your individual circumstances. With life insurance, your loved ones get a death benefit payout if you suddenly pass away, ensuring that they can continue to pay the bills without your income. So, if you have people who depend on your income, you likely need some kind of life insurance. Term life is less expensive and a good idea for people who still have time before retirement. Ideally, once you get older, you will have savings and will not have to pay the life insurance premiums anymore (as they can increase substantially with age).
Identity Theft Insurance
Large-scale data breaches are becoming more and more common. It’s something that many people don’t need, but if you have identity theft insurance, it adds an extra layer of protection in an increasingly complex age of virtual data storage. And if your identity is stolen, the provider will go through the list and contact all of the companies who need to be informed. This saves you from the hassle of contacting dozens of organizations to confirm that your data is safe.
Long-Term Care Insurance
Long-term care insurance (also known as “nursing home insurance”) is a great hedge against health-related issues as you age. You should probably consider buying some type of long-term care insurance in your 50s. If you buy it earlier, you may end up paying years of premiums unnecessarily. And while long-term care insurance may not be vital for everyone, it is a good form of protection if you do not have family members or loved ones to care for you when you are older.
The Bottom Line
There are many, many different types of insurance, far beyond what we have included in today’s guide. However, your needs dictate the type of insurance you should purchase. It’s like getting a warranty on a computer or mobile device. You should always do your research to make sure you’re not getting ripped off or becoming overly “insurance rich.” If you really evaluate the insurance you need (and the insurance you should forego), you can avoid overpaying for unnecessary insurance. This gives you more financial room to put money into savings or set up an emergency account.
And before you try to do all the work on your own, talk to your employer about different options. HR departments at work can help you get insurance through your company and let you know what options you have at your disposal. Then, you can go shopping to see what kind of policies and premiums you would need to pay. Mentoro can work in tandem with your employer to help you find the best solutions for your life circumstances.
During a one-on-one meeting with a Mentoro financial advisor, we can help you determine what kind of policies you need and point you in the right direction. After all, insurance is not a one-size-fits-all type of risk protection. A 22-year-old single person has different needs and risks than a 40-year-old with a spouse and 2 kids. Fortunately, we have years of experience and knowledge to help you get the best insurance for your needs, all while sticking to your budget.