Law #23: Master these 6 insurances to be financially free
The Law
Insurance is one of those things that can quickly end up on the chopping block when times get tight. Decisions can get tricky when you’re up against the wall and you have to choose between one necessity and another. Understanding the critical insurances you need for financial security will help you make better decisions. But sometimes, securing an appropriate mix of insurances is less about finances and more about knowing which ones are important. Whatever your position, use this advice to consider whether you have a good insurance product mix to secure your interests.
Your Keys to Power
Long-term disability insurance. Long-term disability insurance protects you if you can no longer work due to a qualifying disability. While it can be challenging to think about those types of things, it is crucial to have security if your ability to earn through work is interrupted Long term. You want to find a policy that provides enough coverage to continue your current lifestyle, even if you can’t work anymore. This type of insurance often pays a portion of your salary for covered disabilities, for instance, 50 to 60%. To qualify for long-term disability insurance payments, you’ll typically have to have exhausted your short-term disability insurance options and submitted information from your medical provider substantiating your medical disability claim. Learn more about long-term disability insurance here.
Life insurance. This kind of insurance is the only one on this list designed to take care of people who depend on you. For instance, if your spouse, children, parents, or other loved ones may face financial hardship if you die, investing in life insurance should be a priority. Look for a policy that replaces your income in the event of your death, so consider how much you earn each year and how long you plan to remain employed. Look for a plan that also covers the cost of burial to prevent your loved ones from having to handle that unexpected cost. Learn more about life insurance here.
Health insurance. This kind of insurance lowers the cost of routine and emergency medical care. It covers annual physicals, acute illness visits, specialists' treatment, emergency care, and longer-term hospital stays. Serious injuries resulting in extended hospital stays can cost tremendous amounts without insurance. While investing in health insurance is costly for many American families, not having insurance can be significantly more financially devastating. Learn more about health insurance here.
Homeowner's or renter's insurance. Securing where you and your family lay your heads at night is second only to securing your health. If you have to replace or repair your home, that can deal a devastating blow to your finances. Paying for damage to a rented property or an injury for someone like a visitor getting hurt at your place can cause a substantial financial setback. Homeowner's insurance takes care of the former, renters insurance the latter. These policies make these unfortunate, occasional parts of life a lot more bearable. Hopefully, you’ll never experience a situation where you have to file a claim on your home, apartment, or condo, but in the unpleasant event you do, these policies will feel like life savers. When shopping for a homeowners insurance policy, seek one that will offer to replace your home and its contents should there be a disaster, as well as the cost of living somewhere else while you’re home gets repaired or replaced. To learn more about homeowners insurance, go here, and go here to learn more about renters insurance. With either policy, look for ones that cover potential liability for injuries sustained while on your property.
Automobile insurance. If you drive a vehicle, whether you own it or lease it, automobile insurance is critical. Most states require coverage depending on whether you own or lease a car. Even if you’re not required to have it, and even if your vehicle is older and paid off, don’t skip out on insurance. Vehicle insurance covers damage to your car and body, others' vehicles and bodies, and any other property you damage. Without insurance, if you are at fault for an accident, you could end up with a lawsuit that could deal a harsh financial blow. Skipping automobile insurance altogether or investing in only the bare minimum puts everything you own at risk. Learn more about automobile insurance here.
Long-term care insurance. Investing in long-term care insurance provides coverage for services like nursing homes or in-home assistance with personal matters like eating, grooming, and bathing. If you develop a chronic illness or disability that requires ongoing help, this insurance would have been a good investment. Medicare doesn’t often cover these types of expenses. This coverage becomes increasingly important with age. Protect your savings and retirement accounts with an investment in long-term care insurance at around 60 years old; however, augment that number based on personal factors. For instance, your current health and family history will help you figure out when might be the best time to invest in this type of insurance. These same factors will impact the cost of your insurance plan. Learn more about long-term care insurance here, and go here to look for an Endorsed Local Provider. It never hurts to have this conversation earlier in your life to plan for the potential costs in advance.
Practical Application
Don’t get overwhelmed. With this many insurances to consider, it is easy to get overwhelmed. Let’s be real—it’s a lot of information. But there are also a lot of quality resources out there to help you make the best decision. Do your research on the types of insurance policies that interest you, research them, and find quality insurance providers. Don’t be afraid to call and ask questions. If you get someone extremely salesy, hang up and call again.
Get a broker. If you find a trustworthy broker, developing a relationship with them and their company can be a great way to protect your interests. A broker's job is to make sure that you have adequate coverage. While it may seem that their goal is to make you spend more of your hard-earned money, the best ones explain all options and recommend what they think is crucial while also telling you what things they don’t think you need. Do your due diligence when talking to a broker, and don’t consider just one person. If you can, get a referral from a trusted source.
Budget for insurance. Never let affordability get in the way of investing in insurance. A single situation could gobble up your savings, retirement, future earnings, and assets. Sure, there are times when affordability is an issue, but always keep the insurances you need in the front of your mind, and do all you can to build them into your budget.
Try autopay. One of the worst things would be to have invested in insurance that gets canceled and lose potential benefits because you forgot to make a payment. Everybody is busy, so try auto-pay to keep that unfortunate thing from happening.
Mind your renewals. Keep a calendar of your renewal dates. Set reminders in whatever format works best for you to keep up with when your policies need to be renewed to avoid gaps in coverage. If you’re working with a good broker, they’ll take on most of this work because they’ll keep track of your renewals. But it never hurts to track your renewal dates on your own anyway.
Keep a copy of your policies and read them. Perhaps one of the worst things you can do is have a conversation about your policy after something has happened when you haven’t read your policy. Always keep a copy of your policy on hand and find time to read through policy documents before something happens. These documents are typically lengthy, boring reads, but make time to read them.
Be careful not to invalidate your policies. Certain actions you take may invalidate insurance policies. This is one of the reasons why it is so critical to read your policy document. Know what you must and cannot do to keep your policies active and in effect.
Authority
“There are risks and costs to a program of action. But they are far less than the long-range risks and costs of comfortable inaction.” - John Fitzgerald Kennedy
“Term life insurance is a good defensive game plan” - Dave Ramsey
“The duty of planning tomorrow’s work is today’s duty; though its material is borrowed from the future, the duty, like all duties, is in the Present.” - C.S. Lewis
“Let our advance worrying become advance thinking and planning.” - Winston Churchill
“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.” - Abraham Lincoln
“The time to repair the roof is when the sun is shining.” - John F. Kennedy
“It takes as much energy to wish as it does to plan.” - Eleanor Roosevelt
“Strategic planning for the future is the most hopeful indication of our increasing social intelligence.” - William H. Hastie
Our Vote
We believe in investing in insurance. From health insurance to homeowners insurance to renters insurance to a whole host of insurances for businesses (we didn’t go into this issue since we were keeping it on the personal side), we are insured up to our ears. We consistently refer to securing insurance as an investment rather than an expense. Indeed, it is money out of your pocket, but we believe it is essential to see it as an investment in your future security. While it may not pay you profits or dividends the way investment in a company or stocks would, it can save you tremendous amounts of money should you end up in some unfortunate situation.
Reversal
There are a few opportunities for the reversal of this law. Only in the most extreme, dire situations should you forgo the benefits of an investment in insurance. Health insurance is at the top of the list of priorities. If you cannot afford health insurance, seek programs and federal or state benefits that may offer insurance.
If you cannot afford the other types of insurance listed, work toward making an action plan to invest in coverage as you build assets. Of course, if you don’t have a home or don’t rent (i.e., if they live with someone), you may not need homeowner's or renter's insurance.