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7 types of insurance policies you do and don鈥檛 need

Stay covered, but only for what you need.

Article published: May 31, 2024

By:

Robert Bain

, Director of Insurance

While insurance may not be exciting, it is important. Looking at the expensive premiums and complicated policies, it can be tempting to forgo buying insurance. With a different type of insurance policy for everything, it is easy to think you鈥檒l never need the coverage. But sometimes, disaster strikes when you least expect it, and to avoid significant financial hardships, you鈥檙e going to need insurance.

At the same time, not every insurance policy is worth the premium payments 鈥 especially when there鈥檚 overlap with your existing plans or little likelihood of the specific circumstances it covers. So, which policies do you actually need for financial protection, and which ones will cost you more in the long term?

To help you obtain comprehensive coverage without excessive costs, here are the seven types of insurance you do and don鈥檛 need:

7 types of insurance policies you need

1. Health insurance

While health insurance has become increasingly complicated over the last few years, it鈥檚 essential. An unexpected medical event can cause severe financial issues and even lead to potential bankruptcy. And as inflation rises, so do medical expenses, with a significant uptick of 3.1% in January 2023.1聽Having a health insurance plan in place can not only protect you from potential financial loss due to an emergency, but it can also save you money on routine checkups.

2. Life insurance

There are many forms of life insurance, but the most basic and least expensive is term life insurance. This pays beneficiaries a specific amount of money if you die within the time period set in the policy.

In contrast to term insurance, there鈥檚 also permanent life insurance, which is designed to last for as long as you live, provided you continually make the premium payments.

Individuals should聽purchase life insurance based on their specific needs. For instance, someone with minors might need to purchase a higher amount of coverage to help ensure their children鈥檚 upbringing costs are covered in the event of their death.

3. Disability insurance

Disability insurance聽replaces a portion of your salary if you became temporarily or permanently disabled. While you might not think it鈥檚 important to consider, around 25% of today鈥檚 young workers will become disabled before the age of 67.2聽Meanwhile, 35% of the private sector workforce has no disability insurance policy in place.2聽There are a lot of nuances to this type of insurance regarding when you鈥檇 be able to receive compensation and under what circumstances. Make sure you鈥檝e done your due diligence prior to purchasing.

4. Long-term care insurance

As many as 70% of people aged 65 and older will need some kind of long-term care in their life.3聽Yet, the average annual cost of a private room in a nursing home in the United States is $108,405 and is expected to jump to $141,444 by 2030.4聽Will you be able to afford this?聽Long-term care insurance聽is intended to help cover the cost of care received for home care, or in facilities like assisted living and nursing homes. When deciding between policies, look at the assets you have outside the insurance that could possibly pay for your care. Of course, you don鈥檛 want long-term care expenses eating into your retirement funds.

5. Homeowners insurance

Your home might be the biggest purchase you鈥檒l ever make 鈥 don鈥檛 you want to protect it? Homeowners insurance pays for damage to your house and often provides the necessary funds for temporary accommodations while your home is being repaired. A homeowners policy will be required while you have a mortgage, but it鈥檚 still important to maintain once your home is paid for.

6. Umbrella liability insurance

This coverage extends the liability protection provided on your 鈥渦nderlying policies,鈥 like homeowners and auto insurance. You can purchase additional coverage in million-dollar increments.

7. Automobile insurance

Approximately 5.25 million car crashes occur in the U.S. each year, according to recent data.5 Accidents happen, and it鈥檚 crucial to have car insurance for when they do. Beyond just collision coverage for your vehicle, auto insurance should also pay for the other party鈥檚 damage in the event of an accident for which you鈥檙e found to be at fault.

7 types of insurance policies you don鈥檛 need

1. Private mortgage insurance

When you鈥檙e buying a house, if your down payment is less than 5% (sometimes, less than 20%), you鈥檒l often be required to purchase private mortgage insurance. If you fail to make your payments, the policy pays it off 鈥 but it pays the lender to protect it against risks, not you or your family. Even when you鈥檙e paying your mortgage on time, the PMI premium payments, which can cost hundreds of dollars per month, can be a drain on your wallet. Once you have 20% equity paid into your home, ask your lender to cancel this insurance.

2. Mortgage life insurance

If you die, this policy pays off your remaining mortgage balance. Unfortunately, the money goes to your lender, not your surviving family. The premiums are also high. Consider replacing this policy with a term life policy and name your spouse or children as the beneficiary.

3. Flight insurance

You might think you鈥檝e never bought a flight insurance policy when you purchased an airline ticket, but check with your credit card company. Some flights automatically bill you for the coverage when you buy a plane ticket. Even without this coverage, if you die in an accident, the airline is likely to compensate your family regardless of this additional cost. But that鈥檚 not the point. Your life insurance policy should have enough coverage to provide for your family no matter your cause of death.

4. Accidental death and dismemberment (ad&d) insurance

Unless your life is a Buster Keaton physical comedy, a deadly accident isn鈥檛 likely. Your home, life and auto insurance coverage should already protect you and your family from a financial loss due to a catastrophe like a car accident or fire; so your family likely doesn鈥檛 need more money because you die in an accident instead of an illness. And that鈥檚 not to mention the difficulty of proving that you died of an accident 鈥 and not a heart attack from stress following the accident.

5. Cancer insurance

Even if you have a family history of diseases, insurance policies designed to cover specific things, like cancer or heart disease, are rarely worth the extra costs in premiums. Similar to the above, you鈥檒l want life and health insurance that pays, regardless of the diagnosis.

6. Credit insurance

If you die, this insurance pays off your credit cards. While this might sound like a good thing to do for any surviving family members, credit insurance is extremely expensive and not recommended. Besides, you鈥檙e not supposed to carry balances from month to month. Even if you do, cards in your name don鈥檛 automatically become the obligation of your survivors. And if you fear they鈥檒l become their obligation, get term life insurance, which is less expensive.

7. Children鈥檚 life insurance

Don鈥檛 buy a separate policy for each child. Instead, add a child rider to your own life insurance policies. For about $25 per year, you鈥檒l get enough to cover final expenses. Also, don鈥檛 buy life insurance as a means of聽saving for college. Instead, establish a聽529 college savings plan.

Need assurance? Consider insurance.

Don鈥檛 let the hefty premium payments and complicated policies deter you 鈥 some insurance plans are necessary to help mitigate financial issues following an unplanned event. At the same time, don鈥檛 let the anxiety of unforeseen challenges pressure you into buying unnecessary policies that could be covered by broader plans that can benefit you more in the long run. Get the facts. Understand your options and choose the best types of insurance policies for you and your family.

At 香港六合彩资料, we help our clients manage risks with comprehensive,聽integrated insurance planning strategies聽designed to safeguard what鈥檚 most important without draining your wealth. We can tailor each financial plan to your specific needs and assets so you can rest easy knowing, no matter what, you have a plan in place.

To help you maximize protection, we use an integrated wealth management approach that takes into account things like investments, taxes, insurance, retirement planning and estate planning. By providing guidance on all of these elements together, we can create a cohesive view of your finances to identify new opportunities to help build, grow, protect and preserve your wealth and your family.

Reach out to a聽financial planner聽today to see how you can prepare for risks at every turn.

1. Bureau of Labor Statistics. (March 14, 2023). Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average, by expenditure category. Retrieved on March 23, 2023, from聽https://www.bls.gov/news.release/cpi.t01.htm

2. Social Security Administration. (2023).聽Social Security Fact Sheet. Retrieved March 23, 2023, from聽https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf

3. Cross River Therapy. (2023, February 2).聽Long-Term Care/Nursing Home Statistics聽(2023). Retrieved on March 23, 2023, from聽https://www.crossrivertherapy.com/long-term-care-statistics

4. Senior Living. (2023, March 22).聽Nursing Home Costs in 2023. Retrieved on March 22, 2023, from聽https://www.seniorliving.org/nursing-homes/costs/

5. Bureau of Transportation Statistics. (2021).聽Motor Vehicle Safety Data. Retrieved March 22, 2023, from聽https://www.bts.gov/content/motor-vehicle-safety-data

Neither 香港六合彩资料 Engines Advisors L.L.C. nor any of its advisors sell insurance products. 香港六合彩资料 affiliates may receive insurance-related compensation for the referral of insurance opportunities to third parties if individuals elect to purchase insurance through those third parties. You are encouraged to review this information with your insurance agent or broker to determine the best options for your particular circumstances.

AM3507203


Robert Bain

Director of Insurance

With more than 20 years of experience in the field, Rob leads the Advanced Planning Strategies Insurance Team, specializing in insurance guidance and planning.聽

Rob joined 香港六合彩资料 in 2016 and holds a Certification for Long-Term Care (CLTC庐). While he transitioned to the insurance industry in 2002, Rob has 13 years of previous experience in the payroll and benefits ...