When you’re young, it’s easy to think you don’t need insurance. After all, you’re healthy, strong and have your whole life ahead of you. Even if you get into a few scrapes here and there, you can bounce back in a jiffy, right?
Actually, that’s exactly why you need insurance. Living life to the fullest requires peace of mind, and peace of mind comes when you know you’re covered no matter what happens. For starters, here’s an overview of insurance types (and a guide on how to buy them).
Considering that every American household has at least one car, it’s not hard to see why this is a hot one. If you get involved in an accident, your car insurance covers expenses resulting from damage to your vehicle. Depending on what type you purchase, you can also get covered for bodily injury, as well as liabilities that arise from the collision.
Credit Card Insurance
Yes, you can get your credit card insured — or, more accurately, the amount you owe on it. Basically, this type pays off part of your debt, provided certain conditions are met. However, most credit card insurance policies cover only the minimum amount owed, and it can come with a ton of strings you’d rather not attach to it.
Even if you’re not disabled now, there’s a 25 percent chance you’ll need this in the future. If you’re unable to work because of your disability, this will cover part of your income for the time being. However, if you’re over 65, or if you need medical or long-term care services, it’s better to seek financial assistance somewhere else.
As you know, medical and surgical procedures can break your wallet. If you suffer from a serious disease, for example, and you find yourself having to shell out thousands of dollars, health insurance is a great buffer. Fortunately, most sensible employers offer this type of insurance, and for good reason.
What if you leave your house one day, and come back to find it burned to the ground? That’s where homeowner’s insurance comes in. Typically, it includes property damage (e.g. repairs due to natural disasters) and liability coverage (e.g. your dog marked his territory all over the neighbor’s garden).
This protects your loved ones from financial problems in case you die too early. There are three types of life insurance: term life, whole life and universal life. Keep in mind that there are also variations on these types, so make sure you consult a knowledgeable financial planner before buying this one.
Whenever you take a vacation outside your town/city/country, there’s always a possibility that something will go wrong. Your flight can get cancelled, your bag can get lost or you may require emergency medical assistance. Fortunately, most travel insurance policies cover those, and more.
Other Types of Insurance
No matter which type you purchase, though, you’ll increase your chances of getting a good deal if you keep these tips in mind:
- Know What You Need. You don’t have to purchase every type of insurance available on the market. If your job requires you to travel frequently, for example, it won’t hurt to purchase travel insurance. But if you pay your bills on time and have a good credit score, why should you pay a premium for credit card insurance?
- Shop Around. Thanks to the Internet, it’s easy to narrow your options with a few clicks. You can also post your question in reliable personal finance forums, and watch the street-savvy answers trickle in. (Of course, don’t forget to verify their claims with other independent sources!)
- Pay Higher Deductibles. One way to reduce your premiums owed is to increase your deductibles. However, be sure to do the math on whether raising deductibles will save you more in the long run, and beef up your emergency fund to prepare for the added expenses.
- Keep an Eye Out for Discounts. Most insurance companies reward policyholders who meet certain criteria. For example, if you’re a good driver, your car insurance premiums may be lowered. Same goes for nonsmokers who have life insurance, policyholders who stick with only one insurance provider, etc.
- Combine Your Coverage. If you (1) need two or more types of insurance; (2) your provider offers to combine them; and (3) you calculate that this will lower your expenses in the long run, go for it.
- Read the Fine Print. If you read the terms and conditions, and parts of it aren’t clear to you, don’t be afraid to ask your provider about them. You’re the one paying for the policy, after all, and you want to make the most of your investment.
With a good grasp on the basics of insurance, even the most complicated-looking policy won’t faze you. If you have questions about this piece, or have any other thoughts, feel free to let me know in the comments.