Keep the umbrella handy before the rainstorm kicks in.
It is inevitable to avoid unforeseen circumstances in life but the closest one can come to risk aversion is by buying insurance cover. Insurance is intended to protect, at least financially, in the eventuality of unfavourable events.
At the same time, there are several insurance alternatives available, and many financial gurus believe you should get them all. It might, however, be tough to identify what type of insurance you require – especially with respect to your age.
The right kind and amount of insurance to purchase is always decided by the unique scenario that one faces. While constructing an insurance portfolio, number of factors have to be considered such as children, age, lifestyle, and work perks. However, most financial gurus recommend that everyone should obtain these four basic forms of insurance – life, health, vehicle, auto and long-term disability.
Why Buy Insurance at a Young Age
Insurance isn’t something that one would read, speak about, or buy every day, like a Netflix subscription. But it’s something to think about as much as one thinks about himself and for their family. Especially when it has the potential to cost an individual and the family far more than one can fathom.
In layman’s terms, insurance is a financial safety net against a loss that may leave a hole in one’s wallet or life. Not only that, but one may end up severing the entire life’s savings if one does not have insurance.
So against what does insurance provide financial coverage?
It generally does not matter how healthy one thinks one is or even if one goes to the gym every day and follow a diet. An unforeseen event such as suffering from a chronic disease, terminal life illness, or disability caused due to an accident or even death, may flip things upside down. It is a known fact now, irrespective of age, gender, and lifestyle, anyone can be a victim of such eventualities.
And it is here that various types of insurance plans can act as a protective shield, offering a source of financial aid in the need of an hour – just like a true friend.
There are several forms of insurance that one can take up. It is critical to evaluate various forms of insurance, their purposes, and which one you should choose. The fascinating reality is that virtually all sorts of insurance policies are now available online. Furthermore, insurance products may be researched, assessed, and purchased online. Online, you may compare numerous insurance packages and choose the best one for you.
The fundamental question is, what sort of insurance plan should one choose, and when should one choose it?
Here’s a quick guide to assist you.
Types of insurance and which one should you go for
1. Life Insurance
The most apparent reason to get life insurance is if one has clearly insurable interests and wishes to be financially protected in the event of a catastrophic disaster. For example, one may have significant financial commitments from education loans or a mortgage that one does not wish to pass on to another person. One may also have a husband or children who rely on your income, and they may rely on insurance claims to live in case of a tragic mishap.
However, insurance might include characteristics other than a death benefit, which means there may be other compelling reasons to purchase a policy.
Some types of life insurance plans give assistance for specific medical conditions, such as cancer or paralysis. Through the growth of cash value, permanent life insurance plans can function as tax-advantaged savings vehicles. Although federal law forbids insurance companies from selling plans based on their financial value, this almost definitely occurs.*
This is not to say that purchasing insurance for the potential cash value build-up is always a poor idea. In certain cases, the cash value may accumulate money more quickly than alternative investments with lower risk and more favourable legal consequences.
One should remember to include also everyday living expenditures when calculating the amount of life insurance coverage one requires. Mortgage payments, outstanding loans, credit card debt, taxes, child care, and future education expenditures are examples of such expenditures.
2. Health Insurance
According to a 2019 research published in the American Journal of Public Health, you and your family are statistically only one major sickness away from bankruptcy. Two out of every three bankruptcies were caused by medical difficulties, according to the Journal’s poll of more than 900 Americans who filed for personal bankruptcy between 2013 and 2016.*
Those figures should be enough to persuade one to get health insurance or to examine and perhaps enhance your current coverage. However, with rising co-payments, higher deductibles, and fewer coverage options, health insurance has become a luxury that fewer and fewer people can afford. Considering the fact that the national average cost for one day in the hospital was $2,517 in 2018, even the types of insurance plans that have a minimum premium are better than none.*
Participating in your employer’s health insurance policy may be the best and least expensive choice. However, many smaller firms do not provide this benefit. According to Kaiser Family Foundation research, the average annual premium cost to an employee in an employer-sponsored health care programme in 2019 was $7,188 for single coverage and $20,576 for a family plan.*
If health insurance via your work is not available, one should inquire about group health coverage through trade groups or associations. If that isn’t an option, you’ll have to get private health insurance.
3. Long-Term Disability Coverage
Protracted disability insurance is the one type of insurance plan that most people believe they would never require. Nonetheless, as per data from the Social Security Administration, one in every four employees getting into the labour market will become handicapped and rendered unable to work prior to reaching retirement age.
Even employees with outstanding health insurance, a big nest fund, and a decent life insurance policy frequently fail to plan to see the day when they may be unable to work for weeks, months, or ever again. While hospitalization and medical expenditures costs are covered by health insurance, one is still responsible for the day-to-day costs that one’s salary normally supports.
4. Auto Insurance
According to the National Highway Traffic Safety Administration, there were 6.7 million vehicle accidents in the United States in 2018.* In 2019, an estimated 38,800 persons died in vehicle accidents.* According to 2018 CDC data, vehicle accidents were the leading cause of mortality for Americans aged five to 24.* In 2018, almost 2.7 million drivers and passengers were wounded. The economic consequences of automobile accidents, including fatalities and debilitating injuries, were estimated to be approximately $242 billion in 2010.*
Even though not all states mandate drivers to obtain vehicle insurance, the majority of them do have laws governing financial liability in the case of an accident.
States that do require insurance conduct periodic random checks of drivers for proof of insurance. If you do not have coverage, the fines can vary by state and can range from the suspension of your license to points on your driving record, to fines from $500 to $1,000.
Additional Insurances one would need in their 20s, 30s and 40s
While in 20s
Within this age bracket, additional Renters insurance can be useful. This insurance exemplifies the umbrella theory: while it may feel cumbersome to keep along, you’ll be pleased it’s there when it rains. If you live on your own and not with your parents or on a college campus, you should get renters insurance. Policies vary based on region, house type, and coverage level, but they’re typically inexpensive — most people pay between $15 and $20 per month and protect the repair of your personal belongings as well as a temporary living arrangement if you’re unable to inhabit your leased home.
One can stop this insurance when there remains no need to rent anything anymore.
While in the 30s
People in this age group generally require to purchase homeowners insurance as they become financially stable to purchase a house. Additionally, most mortgage lenders demand homes insurance, which should cover everything from the building to your possessions to liabilities in the event that someone is hurt on your property. The insurance rate is decided by an insurer on the basis of the location of the home, as well as its size, age, and construction. Houses in high-risk locations like wildfires, tornadoes, or hurricanes will nearly always fetch a higher premium.
Pet insurance is another safety net that some in this age bracket could need. Though it’s not a must-have, if you’re willing to spend $8,000 on your dog’s operation, it could be worthwhile to consider. Some plans also include basic vet visits and vaccines, and the majority of them will pay up to 90% of your vet costs. Insurance for dogs is usually more expensive than policies for cats, with accidents and sickness insurance varying from $330 to $530 per year on average.
While in the 40s
When you get to this age, it would be worthwhile to consider purchasing long-term care insurance which is generally not covered in health insurance or typically by government-run health insurance programs for Americans who are more than 65 years of age.
Long-term care insurance can help to cover the high costs for people who are old or handicapped and require assistance with everyday life, whether in a nursing home or through hospice.
This is the type of insurance that typically are not considered by people till they grow older and come to realise that it could actually be needed by them. But with age, insurance becomes costlier. Hence it is a good idea to consider purchasing long-term care insurance even before one actually needs it. However, many long-term care insurance gradually raise rates as one becomes older.