Paying for insurance, when you don’t necessarily need it, on a monthly basis can be a real hassle. Don’t be fooled into thinking that you are paying for nothing even though it may seem like that to you. Insurance is crucial when it comes to things on the defensive side of your game plan in this situation, even though it may not be as visually appealing as something like your debt snowball.
Consider insurance as a life vest. When you don’t need it, it hurts, but when you do, you are incredibly grateful to have it. Here, risk transfer is the key concept. Without insurance, a single auto accident, illness, or emergency could leave you with a significant financial mess.
In most places, having auto insurance of some kind is required by law. Reasonable car insurance is something you shouldn’t avoid, even if you aren’t required to have it and you drive an old clunker that has been paid off for years. You may face a lawsuit that could cost you everything you own if you cause an accident and someone is hurt or their property is damaged. Accidents occur suddenly, and the outcomes are frequently tragic. You save very little money and put everything you own at risk if you have no auto insurance or only purchase the minimum amount of coverage.
The cost of replacing your home is high, but the process might go more smoothly if you have the appropriate homeowner’s insurance. When looking for a policy, look for one that includes coverage for the cost of living elsewhere while your home is being repaired, as well as the replacement of the structure and its contents.
Since you already own the land, the cost of rebuilding doesn’t need to include the actual cost of the land. The cost to replace your home could be higher or lower than what you paid for it depending on its age and the amenities it has. Find out how many local builders charge per square foot and multiply that amount by the volume of space you need to replace to get an accurate estimate. Make sure you calculate the potential price of upgrades and extra features and verify once again that the insurance policy will pay for any liability for accidents that might happen on your property.
Life insurance should be high on your list of necessary insurance policies if your parents, spouse, kids, or other loved ones would suffer financially as a result of your passing. Consider how much you make annually (and how long you intend to work), then buy a policy to replace that income in the event of your untimely death. Make sure you include the cost of burial as well, as many families struggle with this unexpected expense.
Health insurance is increasingly important due to the rising costs of medical care. Even a routine trip to the family doctor can incur a sizable expense. In fact, a bill for more severe injuries that necessitate a hospital stay may exceed the cost of a week at a five-star resort. Surgery-related injuries can be as much as five-figure costs. Although almost everyone finds the cost of health insurance to be prohibitive, the potential cost of not having coverage is much higher.
Long-Term Disability Insurance
Because it is so terrifying, some people choose to ignore the possibility of long-term disability (LTD). Although we all wish that nothing like that will ever happen to us, putting your future financial security in the hands of hope is not a wise move. Instead, pick a disability insurance plan with sufficient benefits to allow you to maintain your standard of living even if you are no longer able to work.
When an insured person suffers from a covered disability, long-term disability insurance pays out an amount that is equal to a portion of their salaries, such as 50% or 60%. In most cases, long-term disability starts when short-term disability ends. To be eligible for benefits, a disability must have developed after the policy was issued and, typically, after a waiting period. You must submit medical data to the insurer with a doctor’s confirmation.
Losses are a part of life, but how much they affect us and our beloved ones depends on the loss. By providing financial benefits for covered losses, insurance lessens the impact. There are numerous insurance options, but some rank at the top in terms of significance, such as home or property insurance, life insurance, disability insurance, health insurance, and automobile insurance.
Jason is the Marketing Manager at a local advertising company in Australia. He moved to Australia 10 years back for his passion for advertising. Jason recently joined BFA as a volunteer writer and contributes by sharing his valuable experience and knowledge.