I haven't talked about insurance very much on this site, but I do think it is one of the more under-appreciated aspects of personal finance, and one that far too many people neglect. Insurance is so wonderful because it takes the monetary risks associated with a catastrophic life event, and transfers the risks of those events to the insurance company. The insurance company is banking on the fact that most people won't need to use their insurance, but if you're the one who needs it, you'll be glad you have it.
Insurance is your safety net while walking the high wire of life.
My wife and I have had pretty good insurance coverage in all aspects pretty much since we were married. We've got homeowners insurance, life insurance, auto insurance and of course health insurance. We're extremely glad that we had the insurance coverage – especially our health insurance as my wife ended up having a major medical situation 2 years ago where she almost died because of a blood clot in her leg. In the end we ended up spending almost $300,000 on medical care since 2008. Without our good health coverage, we would have been in a horrible situation where our medical debt could have ruined us.
With So Many Kinds Of Insurance – What Kinds Should I Have?
they types of insurance you carry will depend on your personal situation, how secure you are in your finances, and whether or not you actually need to have insurance. Some people may be wealthy enough to actually self-insure. If you're not to that point yet, here are some insurance types that I'd suggest getting:
- health insurance
- life insurance
- disability insurance
- homeowner’s insurance
- auto insurance
- long term care insurance
As I already mentioned my wife and I have had in excess of $300,000 in unexpected medical bills in the last 2 years. Since we had health insurance we ended up only paying about $4,000 or so of those bills, and insurance covered the rest.
Before we had my wife's medical situation, I may have been tempted to think that health insurance wasn't really needed by everyone – for example, for someone young and healthy. But after my healthy 27 year old wife with no history of health issues got sick and almost died, it quickly changed my thinking on this. I realize that just because you're healthy now doesn't mean you can't have an accident, or have a new health issue crop up. Better to get the insurance now while you're healthy and the rates are lower!
I now believe that health insurance is one of the most important types of insurance to carry. The number of people who are forced into bankruptcy or serious financial straits because of medical debt is staggering. Don't become one of the statistics – get insurance!
So where to get your health coverage? For us the first place we checked was with our employers. Since my wife's place of employment didn't have coverage, we were both covered under my work's health care plan. Since my workplace has a group plan our rates are lower than if we were to buy insurance on our own.
If you don't have group coverage through your work available you might want to think about getting a HSA or Health Savings Account. A HSA basically will give you a tax-exempt savings account to pay for your own health care expenses – and it is usually paired up with a high deductible insurance plan of some sort. The insurance plan would cover any major health care expenses that might otherwise be catastrophic – like my wife's situation.
Of course, all of this information surrounding health care coverage could change drastically over the next couple of years as we go down the road of government sponsored health care. Stay tuned.
Term Life Insurance
I didn't get term life insurance until we were expecting our first child because my wife and I were dual income with no kids – and if I were to pass my wife would have been able to continue paying her bills – same as before. Now that we've got another mouth to feed and someone else to think of and provide for – I bought life insurance to help cover costs in case of my untimely end.
This is one that I’ve thought was a good idea, but didn’t pursue until I found out we were expecting our first child. Now that I know we have another family member to provide for, it’s way past time that I got life insurance to help them out in case of my untimely demise.
Term life insurance is extremly cheap nowadays, so there really is no reason not to get it. I was able to get ten times my yearly income in coverage for only around $30/month!
Another type of insurance that I don't currently have, but highly recommend (I'm looking for some!) is disability insurance. If you’re hurt and aren’t able to work, who is going to pay your bills and put food on the table?
In my opinion it's important to have own occupation long term disability insurance that will allow you to protect your family in case you are injured and unable to perform your normal work duties.
Quite often you can get disability insurance via your employer at an extremely cheap rate, so check into that first. After that, you can do a search online to find some affordable rates.
Long Term Care Insurance
Once you're over 60 and still in reasonably good health, you may want to consider getting a long term care insurance policy. If you end up having to go to an assisted living facility the costs can be amazingly high – and if you don’t have insurance it can run through your entire life savings in short order. Having an insurance policy will mean you’re covered and your family protected in case you need to move into a facility. Hope for the best and plan for the worst!
Are there other types of insurance that you think pare important? What types of coverage do you have? Tell us your thoughts on insurance in the comments!