Insurance policies are designed on the principle that although we cannot stop unfortunate events occurring, we can protect ourselves financially against them. There are a vast number of different insurance policies available on the market, and all insurers try to convince us of the merits of their particular product. So much so that it can be difficult to decide which insurance policies are really necessary, and which ones we can realistically live without. Purchasing the right insurance depends primarily on your current situation, for example, your age, whether you have dependants, and the benefits you receive from your employer.
However, there are four main types of insurance that experts agree would be beneficial to most of us, at some point in our lives.
Life insurance is important if you have people who are dependent on you financially. If you were to die unexpectedly then your salary would no longer be available to cover regular household expenses such as mortgage payments, and utility bills, and your family would suffer financial hardship as a result. Life insurance is designed to cover these expenses in your absence, and to ease the financial burden experienced by your family at what would already be a very difficult time.
Researchers have found that if the primary wage earner were to die their family would only be able to cover their household expenses for just a few months; one in four families would have problems covering their outgoings immediately.
Most insurers recommend that you take out cover for around ten times your annual income. When calculating exactly how much cover you need you need to take into account mortgage or rent payments, and other living expenses, such as loan and credit card payments. You should also factor in childcare expenses, and future university fees if applicable.
There are two main types of life insurance policy to choose from: whole life policies, and term life policies. You pay for whole life policies until you die, and you pay for term life policies for a set period of time determined when you take out the policy. It is wise to engage the services of an experienced insurance broker, or financial advisor, before taking out a policy as they can differ widely, and it is important that you arrange cover that meets your needs and requirements exactly.
Health insurance is another one of the four main types of insurance that experts recommend. A recent study revealed that sixty two percent of personal bankruptcies in the US in 2007 were as a direct result of health problems. A surprising seventy eight percent of these filers had health insurance when their illness began. These figures demonstrate that it is important to take out health insurance, and to assess whether your level of cover, if you already have a policy in place, is adequate.
It can be difficult to find affordable health insurance, particularly if you have a pre-existing medical condition, or if you are unable to access health cover via your employer. Again, it can be helpful to consult with a financial advisor to determine what type of policy is right for you.
Many of us doubt that we will ever become disabled, and therefore we omit to take out long-term disability coverage. However, figures show that three in ten workers will become disabled before they reach retirement age, and that twelve percent of the population is currently disabled; almost fifty percent of these people are of working age.
Many employers offer disability coverage as part of their benefits package. If your employer does not offer disability cover then it is advisable to take out your own policy from a private insurer. The best policies offer income replacement of around fifty to sixty percent of your income. Premiums vary considerably according to your age, your current state of health, and your lifestyle.
Laws vary between different countries, but the importance of auto insurance remains constant. Even if it is not a legal requirement to take out auto insurance where you live it is highly recommended that you have some type of policy in place as you will still have to assume financial responsibility in the case of an accident.
If the law dictates that you must have auto insurance in your country of residence then you may be faced with a hefty fine if you do not have a policy in place. In addition, your vehicle is often one of your most valuable assets, and if it is damaged in an accident you may struggle to pay for repairs, or for a replacement. You could also find yourself liable for injuries sustained by your passengers, or the driver of another vehicle, and for damage caused to another vehicle as a result of your negligence.
Insurance policies can be expensive, and it can be tempting to think that we don’t really need them. However, certain policies can protect you from financial ruin so they are definitely worth taking out. Life insurance, health insurance, disability insurance, and auto insurance are four of the main insurance products that you should take into consideration when planning your financial future. An experienced insurance broker, or financial advisor, can discuss with you your options, and help you to find cover that protects both you, and your family, if the worst should happen.