Financial Fiddler

Imagine for a second that you were just in an automobile accident, but did not have auto insurance.  Your car is completely totaled and you hear the sirens from the emergency responders in the distance.   You start to feel a pain in your leg and know that you need immediate medical care. The only problem is that you decided not to get health insurance.  Even before seeing a doctor, you already know that the medical bills are going to pile up.

Insurance is extremely important to help protect yourself against loss.  You could be one car wreck, house fire or illness away from devastating your finances and putting yourself in a dangerous financial position that you may never recover from.  When it comes to insurances, many people get overwhelmed by the many types and options available. Here are some insurances that you definitely should have in place:

1. Auto Insurance

We all know someone who has been in an automobile accident, whether serious or minor.  According to the National Highway Traffic Safety Administration (NHTSA), there were more than 6.4 million fatal, injury and property damage vehicle crashes in the U.S. alone in 2017.  Most states require that drivers carry auto insurance. Even with this requirement, many individuals still choose to drive without insurance. 

Auto insurance is extremely important to have because it protects your car in the event of an accident.  It also can protect you and those involved in the accident. Medical bills add up extremely fast, and having the right amount and the right coverage is very important.  Some of the coverage options within your policy can include: 

• Liability 

• Comprehensive  

• Collision

• Uninsured Motorist Coverage

• Personal Injury Protection      

2. Health Insurance

If you have gone to a doctor or hospital recently and looked at the bill, the numbers are astronomical.  Medical care and treatments are not going down in price. According to a recent study, CNBC found that around 66.5 percent of all bankruptcies were tied to medical issues.  Knowing this statistic, health insurance is one of the most important insurances to have.

Even if you do not go to the doctor often, health insurance is necessary to protect you against financial ruin.  Your good health allows you to work, earn money and enjoy life but that could go away in an instant. You could develop an illness or even have a serious accident causing you to need extensive medical care.  

Many employers offer health insurance as a benefit to their employees.  If your company offers insurance, make sure you are taking advantage of this important benefit.  Many times, health coverage is extended to your spouse and children for an additional cost. If your company does not offer health insurance or maybe you are self-employed, then you can begin exploring options for a personal or family health insurance policy.  

The cost of health insurance can be expensive and sometimes a financial burden, but not having it could be devastating.         

3. Homeowners or Renters Insurance

Your home is one of the biggest financial investments you will ever make in your lifetime.  According to Zillow, the median home value in the United States is $226,800.  It makes perfect sense then to cover it in case of loss. Homeowners and renters insurances are two types of insurances you hope to never use, but they are there if you need them and very important to have.

Homeowners insurance is property insurance that is designed to cover private homes and the contents inside the home.  This insurance protects your home and personal property from things including: fire, windstorms, thunderstorms, vandalism, theft and many others.  The bottom line is that it protects you from loss and helps to insure:

• Your home’s actual structure

• Personal belongings

• Liability coverage for others injured on your property or for damage next to your property

If you rent instead of own, a renters insurance policy is extremely important to have in place.  For the most part, landlords only have insurance that covers damage to the actual dwelling, but that still leaves all your personal belongings vulnerable to fire, theft or damage.  A typical renters policy will cover:

• Your personal property

• Personal liability and medical bills

• Temporary living expenses

4. Disability Insurance

Have you ever known friends or family members who suffer from health issues that leave them unable to work for months or even years?  It may even be yourself who could be facing a serious health issue causing you to not be able to work.

Disability Insurance helps to cover some of your income in the event that you have an illness or injury that keeps you from working.  The biggest question you have to ask yourself is, “How long could I go without a paycheck?” The two main types of disability insurance are short-term or long-term:

• Short-Term Disability.  Typically replaces around 60-70% of your base salary and usually lasts a few months to around one year. 

• Long-Term Disability.  Typically replaces around 40-60% of your base salary and usually lasts until disability ends or after a certain number of years. sometimes leading up to retirement age.   

5. Life Insurance

We have all seen or heard of a devastating story of a young husband and father who dies suddenly and leaves his spouse and young children behind.  No one likes to think about death, but life insurance is one of the most important types of insurance to protect your family in the event of your death.  

Take a step back and look at your current situation.  You may be single, married, married with a family or many other scenarios.  Regardless of your situation, take a look at the primary wage earner and ask if that income were to stop, how would you be able to pay your everyday bills?  Some of the main reasons people have life insurance include:

• Replace a lost income

• Replace a spouse’s income, even if they are a homemaker

• Pay off debt

• Fund education and college for children/dependents

• Cover burial expenses 

• Pay estate taxes

Not only is life insurance important to have in place, but also having the right type and correct amount of insurance is critical.  The two main types of life insurance are Term or Permanent. 

Summary

You never know when life will throw you curve balls.  You could be perfectly healthy one day and the next be totally disabled.  The same goes for your belongings. One day they all could be fine and the next, your house could catch fire or your vehicle could be totaled.  Whatever the situation, there is definitely a need for these various insurances. Over the next few weeks, we will tackle all of these types of insurances more in depth starting with Auto Insurance.