What kind of insurance do you need – right now?
Making sure that you have sufficient insurance coverage may be a bit overwhelming, but it's necessary if you want to protect yourself, your family, and your wealth. Unexpected events and expenses can have serious financial repercussions if you don't have insurance to fall back on.
The type of insurance and amount of coverage that's right for you will change as your life changes – for example, getting married, having children, buying a home, changing jobs, retiring, etc. There are so many kinds of insurance out there, but do you know what type of insurance benefits you most at different stages of your life?
Here’s a look at the different types of insurance recommended for every stage in your life:
1. Single People
Single people may want basic insurance coverage like health, auto, renters, and disability.
Health insurance: Most Americans need insurance to afford healthcare, and as one of the biggest sources of debt and bankruptcy among consumers in the U.S., the right health insurance plan serves as your first line of defense against financial hardship due to medical expenses.
Auto insurance: In almost every state in the U.S., drivers are required to have liability car insurance, and if you’re financing or leasing your car, you’ll probably also need comprehensive coverage and collision coverage.
Renters insurance: If you’re renting your home, renter’s insurance is a crucial safety net for you because while your landlord is responsible for the building itself, you are responsible for everything you own. Renters insurance protects your personal property from potential disasters such as a fire, storm, or theft. Should your rental become unlivable due to the damage of a disaster, renter's insurance also provides "loss of use" coverage.
Disability insurance: When you are injured or ill and unable to work, disability insurance is your safety net, providing you with a percentage of your salary. While many people probably have short-term disability insurance through their employer, long-term disability insurance is the one that most people need.
According to Guardian Life, illness causes 90% of disabilities, and injuries account for the other 10%. Furthermore, over 25% of 20-year-olds today can expect to be out of work for at least a year because of a disabling condition before they retire.
2. Young Married Couple
Young married couples with no children may add life and homeowner's insurance to the mix for additional coverage.
Life Insurance: If you have people who rely on your income for their financial well-being, then you probably need life insurance. It’s best to buy life insurance while you’re young and healthy because most people's health declines with age, and the longer you wait to buy a policy, the more expensive or inaccessible it becomes.
There are two main types of life insurance policies to choose from – permanent life and term life – and choosing the best policy for you depends on your budget, as well as your financial goals.
Homeowners insurance: Homeowners insurance not only protects your home and belongings but also provides liability coverage for injuries that happen on your property. While homeowners insurance is not required, if you have a mortgage your lender will require homeowners insurance to protect the investment.
3. People with Children of All Ages
When you introduce kids into your household, it’s time to increase your existing auto insurance to include coverage for young drivers, as well as add liability coverage. If you plan on sending your kids to college at some point, you could also consider taking advantage of your employer’s FSA/125 plans to make the most of your savings.
FSA Plans: A flexible spending account (FSA) is a type of savings account that provides specific tax advantages by allowing you to contribute a portion of your regular earnings to be used for qualified expenses related to medical and dental services. Employers can also contribute to employees’ accounts.
Section 125 Plans: A section 125 plan, also called a cafeteria plan, is a written plan that lets employees choose between two or more benefits, including qualified benefits, such as health insurance and cash. Employees receive benefits as pre-tax deductions. Employees, their spouses, and their dependents can all benefit from section 125 plans.
4. Empty Nesters
As you get older and your kids grow up and move out, it’s time to consider long-term care insurance, or at least a hybrid life and long-term care policy.
Long-term care insurance: According to industry experts, over 50% of Americans will need some type of long-term care assistance, such as at-home care, assisted living, or care in a nursing home, at some point during retirement. Since Medicare only pays for limited care, you or your family are responsible for paying the difference. Here is where long-term care insurance or a hybrid policy comes into play.
However, most Americans will need long-term care at some point during their retirement. Like life insurance, it's cheaper to get long-term care insurance while you're relatively young and healthy, so you might want to consider long-term care insurance before you need it.
Now that you’re retired, you’ll want to consider a Medicare plan with a Medigap policy to fill in the gaps in coverage. You’ll no longer need disability insurance, but you might want to replace it with long-term care insurance. Life insurance is also recommended for surviving spouses and can be used as a legacy for your heirs.
Medigap: Medigap is basically an add-on insurance plan that provides you with more complete coverage. Original Medicare pays for a lot of the costs of qualified health care services and supplies, but it does not cover everything. Having a Medigap policy can help pay some of the remaining health care costs.
Insurance is a great way to protect your loved ones, preserve your wealth, and generate income. The Legend Group has over 50 years of experience helping people in all stages of life, and our advisors have the knowledge and resources to guide you through the various plans available to you. Each client's needs are different, and we walk you through all the options that will meet your unique situation.
Reach out to us to evaluate your insurance coverage needs and if you have the right plan in place. CONTACT US to speak to one of our local financial advisors today.