Insurance is one of those necessary evils in life that we don’t fully understand but know we need. There are many types of insurance policies available, from health and life to home and auto. It can be confusing to determine what coverage you really need and what is excessive. Here is a breakdown of the essential insurance policies you should have versus what you can probably skip.
Homeowner’s or renter’s insurance is highly recommended to protect your most valuable assets. It covers damage or loss of your home and belongings from events like fire, theft, or natural disasters. Without it, you could face major financial losses if something were to happen to your home. For renters, a basic policy covers your belongings from the same types of risks. These policies are relatively affordable and provide solid protection.
Health insurance is vital to cover expensive medical costs. Hospital stays, surgeries, and long-term care can easily reach hundreds of thousands of dollars without insurance. While health insurance plans vary in coverage and cost, having at least a basic major medical policy is critical to avoid potential financial devastation from health issues.
Life insurance provides financial protection for your loved ones if something were to happen to you. The most common types are term life and whole life insurance. Term life lasts for a specific period of time and is more affordable. Whole life insurance is permanent and builds cash value over time but is more expensive. For most people, a term life policy for 10 to 30 years of coverage is sufficient and the most budget-friendly option.
On the other hand, some types of insurance you may not need include mortgage life insurance, credit card insurance, and cancer or dread disease insurance. These provide limited benefits at often high costs. Mortgage life insurance only pays off your mortgage in the event of death, but a regular term life policy provides more comprehensive coverage for your family. Credit card and dread disease insurance also have limited scope and may exclude many conditions. It is best to avoid these niche insurance policies in favor of more broad coverage.
In the end, the essential insurance policies to have are homeowner’s or renter’s, health, and life insurance. These provide the best protection at a reasonable cost for most situations. Be wary of high-pressure sales tactics for insurance you likely do not need. With the right coverage and adequate limits, insurance gives you confidence that you and your family’s wellbeing are protected from life’s uncertainties.