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4 Types of Insurance You May Need (And 3 You Don’t)
While insurance can seem like a waste of money, there are certain types of insurance that are important. After all, how many times has your house been struck by an earthquake or a catastrophic fire? It just doesn’t happen very often, but sometimes it does. While it’s rare that you actually get any benefit from paying those hefty insurance premiums, you only need one accident to make them worthwhile.
On the other hand, there are several types of policies that don’t make a lot of sense for most of us.
Insurance you might want to consider purchasing:
1. Homeowner’s or Renter’s Insurance. If you own a house, your investment in your home and possessions is worth protecting. If you have a mortgage, you’re probably legally obligated to carry insurance. Renter’s insurance is very inexpensive since it only covers your belongings and not the building itself, that’s your landlord’s responsibility.
· If you have car insurance, your insurance company will often offer homeowner’s or renter’s insurance at a discount for bundling policies. It’s worth asking about.
2. Life Insurance. Think about carrying a life insurance policy if anyone else is dependent on your income. Even if you don’t have a family of your own, it would be considerate to have enough insurance to cover your funeral costs. Check your superannuation policy - often there will be a basic life insurance policy attached.
3. Health Insurance. It’s nice to be able to see a doctor any time and get hospital treatment any time you’re sick or injured. While we are fortunate enough to have free health care (at the moment anyway) having even basic hospital cover gives you the peace of mind in the case of a major medical emergency. Most of us cannot afford the huge bills from hospitals or prolonged medical treatment and often the waiting times for treatment in a public hospital as a public patient can be years, often exacerbating the original medical problem.
The most advantageous policy will depend upon your current health and age. There are many options to match your budget and needs. Basic hospital cover will give you peace of mind and the option to choose your doctors and specialists and allowing you to be treated as a private patient, slashing waiting times.
4. Income Insurance. If you are self-employed, will you have any income if you’re unable to work? It’s possible to receive social security payments, but that can take a while and they certainly won’t cover the rent, mortgage or other bills.
Typically income insurance restores a percentage of your income, typically 50-80%, depending on the policy. Most policies will pay for a set time, depending on the policy. As long as you have income insurance, your financial situation doesn’t have to change dramatically if you’re unable to work.
Income insurance isn't cheap, but if you are self-employed and don’t have a fully funded emergency fund it is something to consider.
Carrying all these insurance policies can be expensive. You may be able to offset some of the cost by avoiding other types of insurance you’re unlikely to need.
Types of policies you might want to consider avoiding
1. Credit Insurance. This is designed to pay your credit card bills upon your death or disability. It may pay all of your balances or a portion of them. This insurance is expensive and often unnecessary.
· If you have life insurance and disability insurance, you’ll be fine. Credit card balances are unsecured debt anyway. That’s the risk the credit card companies take.
2. Pet Insurance. Most experts suggest setting aside a few hundred dollars each year for pet care. Careful examination of several policies shows that few pet insurance policies will pay out more than the cost of the premiums.
3. Child Life Insurance. The whole point of life insurance is to provide for dependents. Your children are unlikely to have any. Put the funds toward a savings plan instead. If anything unexpected happens, you’ll still have money available.
Insurance is a necessary part of a secure financial situation. It may seem like a regular waste of money since you may never see a payout, but that’s not true. Insurance is a cost-effective means of hedging risk. If you ever need it, you’ll be glad you have it.
On the other hand, there are several types of policies that don’t make a lot of sense for most of us.
Insurance you might want to consider purchasing:
1. Homeowner’s or Renter’s Insurance. If you own a house, your investment in your home and possessions is worth protecting. If you have a mortgage, you’re probably legally obligated to carry insurance. Renter’s insurance is very inexpensive since it only covers your belongings and not the building itself, that’s your landlord’s responsibility.
· If you have car insurance, your insurance company will often offer homeowner’s or renter’s insurance at a discount for bundling policies. It’s worth asking about.
2. Life Insurance. Think about carrying a life insurance policy if anyone else is dependent on your income. Even if you don’t have a family of your own, it would be considerate to have enough insurance to cover your funeral costs. Check your superannuation policy - often there will be a basic life insurance policy attached.
3. Health Insurance. It’s nice to be able to see a doctor any time and get hospital treatment any time you’re sick or injured. While we are fortunate enough to have free health care (at the moment anyway) having even basic hospital cover gives you the peace of mind in the case of a major medical emergency. Most of us cannot afford the huge bills from hospitals or prolonged medical treatment and often the waiting times for treatment in a public hospital as a public patient can be years, often exacerbating the original medical problem.
The most advantageous policy will depend upon your current health and age. There are many options to match your budget and needs. Basic hospital cover will give you peace of mind and the option to choose your doctors and specialists and allowing you to be treated as a private patient, slashing waiting times.
4. Income Insurance. If you are self-employed, will you have any income if you’re unable to work? It’s possible to receive social security payments, but that can take a while and they certainly won’t cover the rent, mortgage or other bills.
Typically income insurance restores a percentage of your income, typically 50-80%, depending on the policy. Most policies will pay for a set time, depending on the policy. As long as you have income insurance, your financial situation doesn’t have to change dramatically if you’re unable to work.
Income insurance isn't cheap, but if you are self-employed and don’t have a fully funded emergency fund it is something to consider.
Carrying all these insurance policies can be expensive. You may be able to offset some of the cost by avoiding other types of insurance you’re unlikely to need.
Types of policies you might want to consider avoiding
1. Credit Insurance. This is designed to pay your credit card bills upon your death or disability. It may pay all of your balances or a portion of them. This insurance is expensive and often unnecessary.
· If you have life insurance and disability insurance, you’ll be fine. Credit card balances are unsecured debt anyway. That’s the risk the credit card companies take.
2. Pet Insurance. Most experts suggest setting aside a few hundred dollars each year for pet care. Careful examination of several policies shows that few pet insurance policies will pay out more than the cost of the premiums.
3. Child Life Insurance. The whole point of life insurance is to provide for dependents. Your children are unlikely to have any. Put the funds toward a savings plan instead. If anything unexpected happens, you’ll still have money available.
Insurance is a necessary part of a secure financial situation. It may seem like a regular waste of money since you may never see a payout, but that’s not true. Insurance is a cost-effective means of hedging risk. If you ever need it, you’ll be glad you have it.