Are you properly covered with insurance? If you can answer this question with a “Yes” and with a high degree of certainty, you may skip this blog post.
If you’re not sure how to answer that question or have a doubt whether your answer is right or wrong, continue reading on.
One of the reasons why I’m writing this post is that when I talk to my friends and ask them whether they have adequate insurance coverage for themselves more often than not the answer comes to be a “No”.
Also, I have heard of the difficulties faced by some of the friends that did not have insurance and stories where my friends were saved from paying huge sums of hospital payments caused by accidents.
What is insurance?
Before we go any further, let’s dive into the basic details of what is insurance and why we need it.
Insurance is a form of financial protection against potential financial loss, these losses can arise from anywhere, for example being in hospital due to bad health, resulting from damage to your property, resulting from accidents and many other instances.
In return, you will have to pay a premium for the protection you are receiving on a monthly, half-yearly or even yearly basis until the duration of the policy. The terms and conditions of the particular insurance will be described in the policy.
The provider of the insurance is called the insurer or the underwriter.
Insurance coverage will not last for eternity and it is specified for the duration where you need the coverage for. This information will be available and agreed upon during the issuance of the policy.
As of now, most of the occurrence of financial loss scenarios can be covered with insurance in one form or another.
Who needs insurance?
Ideally, anyone who wishes to be protected from financial losses needs to have insurance, this includes working adults, students, children and even companies. This is to limit the amount of financial damage to your assets in the event of a misfortune.
You need to be protected from financial losses at all levels of life, as we grow older the need increases.
Since this blog is all about personal finances, I’m not going into detail about the different types of corporate insurances. The focus here is the different insurance needs you may have as you grow and reaches new life stages.
While we can’t predict and prevent the unexpected from happening to us, we can still protect ourselves with the help of insurance.
Different types of insurances
Let’s discuss the different types of insurance that are available and their purposes.
- Health Insurance
This is by far the basic and most important insurance one should have, it is designed to protect you from huge hospital bills arising from illness and accidents.
Due to the rising medical costs, you should have good health insurance to cover the huge medical bills fully if possible, to the maximum possible – if 100% cover is not possible.
Some employers provide health insurance benefits for their employees. However, it may not be sufficient in most companies. Even if your employer covers the health insurance fully, you still need to have personal health insurance to be protected even after the termination of your employment.
If you are still thinking, I will get personal health insurance after I quit my employment or so, you will also need to remember that most health insurance policies do not cover pre-existing illnesses.
Therefore, it Is important to get one while you are still healthy.
- Life Insurance
As the name suggests, it is to support your loved ones in the event of your death or even in the event of a total permanent disability in most cases. Just like taxes, death is also certain.
Life insurance come crucial when you have dependents living under your care, i.e your aged parents, spouse and children.
Having the adequate cover will help your family with any medical expenses unpaid, outstanding debts, and also helps your dependents from the costs associated with your burial or funeral. It will also give your dependents some cushion to tide over the short-term loss of income.
Mainly, there are 2 types of life insurance available in most of the markets and you should be better off with term insurance where the goal is just for protection.
It is better to buy insurance when you are young and healthy, this is because you will be able to lock in a cheaper premium compared to starting insurance at a later age and perhaps with some medical condition that you may have picked up along the way.
Ideal coverage for a typical working adult can be 10 times your annual salary, this can vary when there are more debt and other financial commitments. You may not require a huge sum when there are assets/investments with you which can be inherited or passed down to your dependents.
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Travel insurance
Travel insurance is designed to cover your losses related to travelling, it can be useful when you are travelling cross-state or overseas, travel insurance will cover your medical expenses arising from accidents happening overseas or lost items or luggage while overseas or travelling.
Most of the travel insurances will also cover any delays to flights or trip cancellations. It also covers accidental death during travel.
The premium required for travel insurance varies from your destination of choice as well as the duration of the travel.
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Mortgage Insurance
Similar to life insurance, mortgage insurance is designed to payout in the event of a total permanent disability or the death of the mortgagee. However, this is intended to only cover the outstanding loan amount in most cases.
There are different versions of mortgage insurances available that provide other added benefits and cover, provided that you pay a higher premium
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Car Insurance
Car insurance is designed to cover any accidental damages to your car or even a third party.
you must have valid car/vehicle insurance before you drive them in public places.
If you are involved in an accident and someone is injured or their property is damaged, you may be subject to a lawsuit that could cost you everything you own. Accidents happen quickly and the results are often tragic. Having no automobile insurance or purchasing only the minimum required coverage saves you only a tiny amount of money and puts everything else you own at risk.
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Home Insurance
Home insurance is designed to cover any cost involved with damages to your house, this could be caused by accident, fire or other damages caused during the policy period. Most of the time your bank will require you to take one of this insurance before issuing you the loan.
Conclusion
I hope I was able to provide you with some insights into the different important insurance you need to have.
Having proper insurance with adequate cover will provide peace of mind and not worry too much about the potential financial losses that can happen from unprecedented situations.
The above-provided information is just enough to give you a basic understanding of the whole topic of insurance, when you are purchasing one – be sure to keep your eyes open and ears sharp to understand the terms and conditions and the coverage.
If you want me to cover other insurance types/need more clarity on any of the types mentioned above, do drop a comment in the replay session and I’ll address it as a reply or write a separate post.
Have fun and stay protected with insurance! 😀