Insurance You Might Not Know You Need

3 - Insurance Policies You Might Not Know You Need

1. Life Insurance (Term)

Most people think of whole life insurance when they think about life insurance. You pay into this policy for a long time, and the payout is guaranteed until you die.

Term life insurance functions similarly to a car policy. You pay a set sum every year or month for a set number of years. If you die while the insurance is in effect, it will pay out. It doesn't matter if you're still alive at the end.

The downside of term life insurance is the second item. The benefit is that it is substantially less expensive than a whole life coverage. For every dollar spent, you may get a lot more insurance.

Term life insurance is a wise investment for anybody looking to safeguard their family during the years when wages are most vital – when your children are small and your mortgage and vehicle payments are substantial. A term life insurance policy can offer five to ten years of wages to help you deal with bereavement and transition.

When your first term policy expires, you can evaluate your family's financial needs for the next term. You can lower or delete the coverage if your children are grown and you have more funds and fewer expenditures. You can obtain greater coverage for the following several years if your prices remain the same or rise.

Term Life Insurance Do's And Don't's

•DO check to see whether your work, labor union, trade association, or interest club has group term insurance. This can reduce the cost of insurance even further.

•DO NOT LYING about your health, career, or interests. If you do this, the insurance may not mention it when you sign up or pay, but they will almost certainly use it to refuse payment when your family needs care.

•PERFORM RESEARCH ON INSURANCE PROVIDERS. Term life insurance contracts aren't usually sold in good faith, but the internet may provide information about any insurer's reputation.

•DO NOT purchase more or less coverage than you require. Determine how much your family would require — for example, a few years' salaries or the mortgage payoff amount — and stick to that figure.

2. Insurance For Long-Term Disability

It is uncommon, but a life-changing accident can cause significant financial hardship for you and your family in two ways.

For starters, it may prohibit you from working. Long-term disability insurance is similar to life insurance in this regard, and you may buy life insurance that also pays out for permanent disability. Perhaps if you can work, it might limit how much you work — or even drive you into a different area with a lower pay scale — causing you to earn less.

Second, medical treatment costs might be prohibitively expensive, particularly if your impairment needs long-term, permanent, or palliative care. A circumstance like this may deplete your finances faster than most people realize.

Long-term disability insurance replaces your earnings from work while you recuperate by paying you a specific amount — generally a percentage of your regular monthly income.

Long-Term Disability Insurance Do's And Don't's

•DO verify the start and finish dates of the term. Most plans include a time restriction on how long they will pay out and a mandatory wait period between when you missed your first check and when they will pay out.

•DON'T FORGET TO COLLECT RECORDS DURING YOUR FIRST TREATMENT TO PROVE YOUR CLAIM FAST.

•If you don't have an emergency fund, check into short-term disability. This compensates for the initial lag time required to bridge the gap.

•DO NOT BUY A POLICY WITHOUT AN "OWN OCCUPATION" CLAUSE. This provision protects you if you are injured and have to change occupations. Without it, an insurer may refuse a surgeon's claim because he is unable to work as a surgeon but might work as a greeter at Walmart.

3. Additional Health Insurance

If you're lucky, your employer-provided health insurance includes low deductibles or copays and little out-of-pocket costs. If not, you might think about additional health insurance for your health insurance.

Each time you spend money on medical coverage, you receive a cash payout under supplemental health insurance. For example, if your deductible for office visits is $100, you might purchase supplemental health insurance to cover at least $50 of that.

Supplemental health insurance plans may also include a disability payout, which provides a small but occasionally considerable benefit for certain injuries. The specifics vary per policy, but it may be a few hundred dollars for a fractured bone, a few thousand dollars for you to recover from surgery, or a year or more of your pay for a lifelong impairment.

Supplemental Health Insurance Do's And Don't's

•COMPILE THE NUMBERS. It's not worth purchasing if the rates for this coverage surpass what you spend out of pocket in most years.

•DON'T ASSUME that all policies are the same. These differ more than other types of insurance. Make side-by-side comparisons and do your homework.

•DO look for a coverage that allows for payment flexibility. Many supplemental health insurance policies provide this. It implies that you are not required to pay premiums while you are unwell or disabled.

•DO NOT FORGET TO FILE ONCE YOU HAVE COVERAGE. Even little sums might compound up over time.

Insurance Policies You Don't Need

These types of insurance are far from the end of the insurance options accessible to you. Some of the others, depending on your condition, you may also require. Flood insurance, for example, will cover flood damage to your property when your standard homeowner's policy does not. Most people do not.

However, no matter how hard dishonest insurance firms attempt to convince you otherwise, there are a few insurance products that nearly no one needs. These are some examples:

•Debt insurance, which makes payments on your credit cards, auto loan, or even mortgage if you are unable to do so due to a disaster or unemployment. It's excessively expensive in comparison to the danger, and you'd be better off putting that money into savings.

•Children's life insurance, unless it includes guaranteed insurability and your child is in danger of a disqualifying genetic disease. Otherwise, your risk is insufficient to justify the expense.

•Event insurance, which reimburses you for a wedding, bar mitzvah, vacation, or similar event if it is canceled due to unforeseen circumstances. Instead, do everything you can to reduce costs and risks during the planning process

•Extended warranties, which provide low-cost or no-cost maintenance for an additional year or two after purchasing a costly item. Unless you acquire a lemon, these nearly often wind up costing more than the repairs or replacements. In such a situation, you are safe in different ways.

Saving money in an interest-bearing account is frequently your greatest choice for financial security. The cash is then there when you need it and may be spent on something else when you don't.