The world of insurance simply cannot stop inventing new or recreating enhanced versions of insurance. But there are select few forms of insurance that most middle class Americans should consider and own.
Yes, you can save money by avoiding some of them, but in the long run, you are not likely to come out ahead by skipping any of these.
Term Life Insurance:
Everyone does not need life insurance, but most people do, at least at some point. If you do not have children, plan to have children, have someone that financially dependent on you, or are independently wealthy than you may not need life insurance. For everyone else- a simple and affordable term policy can solve a complex financial problem caused by an untimely death. Often buying term life insurance when you get married and begin to have a family is the perfect time. Shoot for a length of time that will get your last child (or last planned) out of the house and potentially through college.
Term as opposed to whole life insurance, is simple and pure insurance, which has no investment component. Although many insurance agents will push you to consider whole or universal life policies, often because it may guarantee coverage for your entire life, term can offer you the exact same protections, but for just the limited crucial time when you are raising your family. The policy generally ends after the term, leaving you with no insurance coverage, but because you spent so much less for the term policy, you will have been able to save up your money and will probably no longer need it.
Home Insurance / Renters Insurance:
Just about every adult needs a home or renters insurance policy, even if you have paid off your mortgage, or if you do not yet own a home. Why? Because both home and renters insurance provide coverages way beyond the property coverages for the structure and your personal belongings. Among many useful coverages, both home or renters insurance covers you for is premises and personal liability. This liability comes from numerous things such as incidents you make get involved in, or when someone comes onto your property and trips. The liability coverage can also help you from your exposure if you own certain types of pets. From the liability side, most policy holders should request a “personal injury” endorsement to their policy to assist in broadening their overall liability protection. This useful endorsement can be had for a very low dollar amount and can end up saving you thousands in a rare but potentially financially ruinous situation.
Auto insurance is often required by various state and national authorities in order for you to purchase an automobile. But even non owners of cars should consider buying automobile insurance for cars that they rent or use. Aim to raise your Bodily Injury coverage to amount sufficient to protect your overall net-worth. Match this amount with your Uninsured motorist coverage. Uninsured motorist is perhaps the worst named insurance term; a better name might be “Self Bodily Injury.” Uninsured motorist typically only kicks in when the other driver either does not have any insurance, enough insurance, or flees the scene of an accident. Please don’t get into any car without uninsured motorist coverage.
Health Insurance which is much debated in the industrialized world may be the number one most important type of insurance that you need. Health insurance can help pay for either emergency care or planned healthcare checkups. Unlike many other forms of insurance, health insurance can be used on an almost weekly basis for various doctors, hospitals, and pharmaceuticals prescriptions. Many people wrongly assume that forgoing health insurance will save them money. Although sometimes this works out in the short term, you will rarely come out ahead in the end.
A middle class American may or may not need an umbrella policy, but the general qualifying calculation should be done regardless of who you are. Most home and Auto insurance policies cap out their liability coverage at $500,000. If your overall net worth is more than $500,000 than you really ought to consider purchasing an inexpensive umbrella policy, typically through the same company that does both your home and auto insurance. Umbrella polices, are extended forms of liability coverage that will efficiently sit over the underlying home, auto, and even other personal liability policies (such as a boat.) These insurance contracts sold in brackets of $1 Million dollars, can be a real financial life saver in the event of a horrendous liability claim, such as hitting and killing another driver.
Umbrella insurance is really one of thebest little secret in the personal financial space. For as low as $250 you may be able to dramatically protect your hard earned wealth.
The Flood, Landslide, and Earthquake Consideration:
These forms of insurance are definitely not necessarily must buys, but every homeowner should consider them in relationship to their cost and benefit. If you own your own house you may want to consider each of these various property insurances that protect your structure from general homeowner exclusions. Each one of these forms of insurance could have a varying degree (and cost) of value depending on the exact location of your home. Often it’s best to ask homeowners who have paid down a significant part of their home, to consider where they would get the funds to rebuild their home if it were torn to shreds by one of these catastrophic events.
Scott W Johnson is the owner of WholeVsTermLifeInsurance.com, a division of Marindependent Insurance Services LLC – an independent insurance agency focused on providing the best insurance value for a family’s financial situation. Johnson and his insurance firm are a certified California Green Business. “Insurance is Complex – Don’t Get Lost.”