The goal of insurance is to offer financial protection against catastrophe. The companies, policies, and payouts change, but the guiding principle of insurance has remained consistent since at least 1347, when the first recorded insurance contract was written in Genoa, Italy.
669 years later, we have a wide range of policies. Some are required, some are a smart idea, while others can be deferred or avoided altogether.
Insurance Day is a great time to re-evaluate your insurance to make sure you’re properly covered. Here's a quick run-down on some common policies worth your consideration.
- Auto Insurance — If you want to drive on public roads in the U.S., you'll need current automobile insurance. Whether you should carry full-coverage or liability-only (liability-only covers the expenses of the other party in an accident; full coverage covers yours and theirs — minus deductible) is often determined by how old your car is, or if you have it financed.
- Health Insurance — Due to recent changes instituted by the federal government, health insurance has become a requirement. Many employers offer it as a benefit, but millions of Americans who didn't have health insurance prior to Obamacare must now carry it.
- Homeowner's/Renter's Insurance — Although you can skip homeowner's insurance if you own your home outright, many prefer having protection in the event of a flood, fire, or burglary. For the vast majority of Americans who are paying on a mortgage, or renting, this type of insurance is a requirement.
Smart Idea Policies:
- Identity Theft Protection — Identity theft is on the rise, and while no one can force you to pay for identity protection that helps with restoration — it's a really smart idea. The risk of identity theft is high, while the cost of protecting it can be nominal.
- Term Life — Life insurance gives you a way to provide financially for your loved ones in the event that something happens to you. There are two popular policies and they are NOT created equal. Financial coach Dave Ramsey adamantly recommends term life insurance vs. whole life policies. In short, term life insurance costs far less and is a better use of your money.
- Long-Term Disability — If you ever suffer from a debilitating accident, long-term disability insurance will help cover lost income and medical care. It's easy to blow disability insurance off as something that happens to "other people," but odds are nearly a third of working Americans will become disabled before retirement.
A policy you can save for later
- Long-Term Care Insurance — Again, to rely on Dave Ramsey's sage advice, this type of policy isn't important to have until you reach 65, but it's no less important. The costs of assisted living and retirement homes can burn through savings at an alarming rate. Long-term care insurance prevents the burden from falling on your loved ones.
Policies you can forget about
As for policies you can skip altogether — options abound. Here is a sampling of the policies you can do without:
- Rental car insurance — When renting a vehicle, you’re usually covered by your existing auto-insurance carrier or the credit card you pay with, so don’t worry about taking what the rental company offers you at an additional price.
- Pet insurance — An emotionally charged option, but in most cases, you’ll end up spending more in premiums than any health procedures your pet will need.
- Body part insurance — Usually the domain of celebrities with endorsement contracts, this policy isn’t even a consideration for the general population.
Remember, insurance companies are for-profit enterprises and if a customer demands coverage and is willing to pay sufficient premiums, a policy can be arranged. Just make sure you’re spending your money on insurance that will actually be worth it in the end!