Many people see insurance as a rip off. But the right insurance coverage might come in handy when you need it.
Last week, I enjoyed a rather nice spring break vacation in Arizona and San Diego. One of the highlights of the week was a trip out to a replica mining town at Castle Dome in Arizona with my grandpa. While there, we saw an old newspaper from the days when the miners still lived there. I was intrigued by an ad for an insurance company:
I enjoy seeing what others think important, and ads for all things finance catch my eye. While this is an ad, it does point out a reality: “Adversity befalls us when we least expect it.”
You never know when something is going to go wrong — and it's likely to happen at an especially inconvenient time. Insurance can help protect your assets from unexpected problems that could result in a financial setback. It makes sense to evaluate your needs, and get the right insurance coverage for you and your family. After all, “It behooves us to protect our income…”
One of the most important things you can do is purchase health insurance coverage. While there have been a lot of complaints about so-called Obamacare, there are some Americans who find that they can buy affordable health insurance for the first time, thanks to subsidies offered through the exchanges.
Health insurance is so important because a major health event can be financially devastating. According to a government report, health care expenditures account for 18 percent of GDP in the United States. On a personal level, medical costs are among the main causes of bankruptcy in the United States. As your medical bills pile up, your financial situation can be harmed. Health insurance can help you better manage unexpected medical costs.
Even if you are self-employed, it makes sense to look for health insurance. (You can even deduct these costs on your taxes.)
If you have good health, it's possible to reduce your insurance costs with the help of a high-deductible plan and a Health Savings Account. It's not usually fun to pay for health insurance, but it can provide peace of mind — and it can mean that you pay $10,000 for a hospital stay instead of $50,000.
Don't forget to insure your property. Whether it's a home or a car, property insurance can help you protect the value of your physical assets. Home insurance is extremely important because the cost of replacing your home if something happens to it is prohibitive. Without the right insurance coverage for your home, you would be stuck paying what you owe on your mortgage, plus trying to figure out how to rebuild.
If you have a home office, you might need to think through your insurance coverage, since not all homeowner's insurance policies cover the business use of your home. Consider the holes that might exist in your homeowner's coverage, and plug those if you can.
Car insurance can help you afford to buy another car if your current car is totaled in an accident. Plus, car insurance is a requirement in all states. So you have to get it anyway.
You might not have to get complete coverage, but you should understand your coverage options — especially with car insurance — and choose coverage that works for your situation.
Don't forget other insurance coverage that has to do with property you might. If you have expensive artwork or jewelry, you should make sure that it is properly covered as well. While you can't replace some items that have sentimental value, the sting is even greater if you are stuck with the financial loss on top of everything. Insurance protects against those big losses.
Disability Insurance, E&O Insurance, and More
There are other types of insurance that you might need, especially if you are a business owner. Do you have a plan to replace your income if you are disabled? While you have probably prepared for the situation in the event that you die early, the reality is that you probably haven't thought much about the possibility of being unable to work due to disability.
If you are a home business owner, or a professional like a lawyer or financial planner, it might make sense to get errors and omission insurance. As doctor, it makes sense to purchase malpractice insurance. It's also a good idea to get the right insurance coverage in other business situations, from business interruption insurance to other types of insurance that you might need, you want to make sure that your business is protected. Chances are that you have poured in a lot of time and resources, so insurance can be a good idea to protect that investment.
Paying insurance bills is never fun. However, it's one way to protect yourself. The price you pay in premiums is relatively small compared to what you could lose in the case of an unexpected and major event. Unless you have built up enough of an emergency fund to self-insure, the way to get the best bang for your buck is to buy the right insurance coverage.