5 Types of Insurance to Include In Your Personal Financial Plan

Types of Insurance
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What types of insurance should you consider when planning your personal finances?

The idea of insurance can be overwhelming for many people.  Especially, since even the best policy only provides coverage against a relatively small number of events.

However, a large part of personal finance is planning for the unexpected.

If you want to be prepared in the face of disaster, it’s important to have insurance coverage based on your particular needs.

There are five types of insurance that we recommend you include  in your personal finance plan; whatever your situation may be.

In this article, we will discuss each of these five plans in a little more detail.

Insurance is not something you should take lightly. So be sure to consider carefully whether or not adding any particular plan would benefit your life and personal finance situation as a whole.

Also Read: 8 Types of Business Insurance Every Entrepreneur Must Know About

#1. Auto Insurance

 Auto or car insurance is one of the most important types of insurance policy everyone should consider buying. No matter how careful we drive, sometimes we still manage to get in an accident. If you want to protect both your car and yourself, you need auto insurance.

Some form of auto insurance is compulsory in most places. Even if it isn’t required where you are, it’s generally a good idea to get a policy to cover your car.

Car accidents can be a tremendous drain on your finances. Aside from the costs, the suddenness of accidents also makes it difficult to plan ahead.

You don’t know when an accident will happen. So you can’t make arrangements for the money in advance. If you already have a strong financial foundation and are prepared with insurance coverage, unexpected accidents may not be as devastating as they could otherwise be.

Here are some of the ways that auto insurance can help:

  • Pays for medical treatment for injuries at the scene of the accident; regardless of fault
  • Pays for our lost wages when we’re unable to work due to injuries from accidents
  • Covers damage to other people’s property including paying them for their medical treatment and lost wages

#2. Home Insurance

A home insurance policy will cover your house and possessions from damage.  Damages due to fire or weather-related  causes such as hail storms, tornados, earthquakes, and hurricanes.

This insurance can also cover damage that your house does to other people’s property in the case of an accident. Or if you are negligent with something on your property such as a swimming pool or trampoline.

Taking care of your home should be one of your top priorities, especially if you plan on ageing in place.

A good home insurance policy:

  • Covers repairs to your home in case of things like fire, smoke or water damage from burst pipes
  • Pays for temporary living expenses if you need to leave while your home is being repaired due to a covered event such as a flood
  • Will reimburse you for the cost of replacing your lost or damaged personal property

Health Insurance

Health insurance is something that everyone needs. But it has become increasingly difficult to find affordable plans.

Many people who don’t have health insurance pay for medical care out of pocket when they need it most.

When something major happens, like a hospital stay or injuries that may require follow-up care, these costs can be astronomical.

If you do not have health insurance and need to pay for medical treatment out of pocket, the bills will add up quickly. Having this type of coverage is one way to protect yourself from huge unexpected expenses in case of an accident or serious illness.

Health insurance policies also come with other benefits that you will not want to pass up on, including:

  • Coverage for preventative care such as regular physicals and doctor visits
  • Costs of prescription medications when prescribed by your doctor
  • Routine checkups and lab work that can catch potential issues before they become major problems

Long-Term Disability Insurance

Disability insurance is another type of coverage that could offer help if you are unable to work due to an accident or illness.

This can be particularly important for those who depend on their income for things like paying off debts, supporting themselves and any family members, or saving up money for retirement.

Without this kind of financial backup, a long-term disability could quickly send you into financial ruin.

Long-term disability insurance:

  • Covers a substantial portion of your income, allowing you to maintain a certain standard of living even when you are unable to work
  • Covers illnesses or accidents, both in and out of work

Life Insurance

If you have a family, this is one of the types of insurance that can be very valuable.

When something happens to you and your income disappears at the same time, it puts extra strain on those who depend on you financially.

It’s never easy thinking about your mortality but life insurance is your best bet for making sure your loved ones are taken care of financially—this is especially true for members of the sandwich generation.

A life insurance policy can help provide:

  • Income replacement benefits that replace the income from your job for your family
  • The means to pay off the mortgage or other major debts so that they are not passed on to those you leave behind
  • A lump-sum payment in case of an untimely death, which can be used towards any outstanding debts or bills.

Here you have it: 5 types of insurance to include in your personal financial plan. 

Any plan for the future that doesn’t have an insurance component is not complete. Those who are confident of tomorrow are those who know that they can still meet their financial goals even if the unexpected occurs.

 

Sophia Young
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