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Financial Planning

7 Types of Insurance to Protect Your Nest Egg

9/17/21 9:00 AM

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Insurance policies serve as a financial safeguard for your assets in the case of an accident. They are also an important component to any financial foundation.

While there are endless policy options available for every lifestyle, purchasing the right type and amount of insurance should always be determined on an individual basis. Read on for a list of required and recommended insurance policies to consider to protect you and your family from extreme financial loss in the event that something unexpected occurs.

Health, Dental, and Vision Insurance

The cost of medical care can be expensive, especially in the event of a long-term hospital stay or surgery. Because of this, health insurance is a necessary policy that you should have.

Before setting off to search for an individual or family plan, talk to your employer’s Human Resources team to see what kind of policy options and coverage you have available to you through an employer-sponsored plan. While this is a fairly standard benefit offering, it’s always a good idea to get the details before you sign-on. Review details such as medical and prescription coverage, as well as deductibles and copays for various types of services.

Some employers bundle health, dental, and vision insurance while others offer them separately. Depending on you and your family's needs, you may want to explore all the options. You never know when you may need a root canal, braces, or new glasses. If your plan is eligible, you may also want to open a health savings account, or HSA. You can read more about the benefits of using an HSA in our blog.

If you’re self-employed or work for a company that does not provide health insurance, you have the option to purchase it on your own. Compare policies from providers like Blue Cross Blue Shield, United Healthcare, Aetna, or Cigna to find the most affordable coverage for you and your family. You can also view available plans through the Affordable Care Act enrollment here.

Homeowners/Renters Insurance

Because a home is often your most valuable asset, it’s important to purchase homeowners insurance in the event of an accident.

Having the right coverage can make the rebuilding or repair process a lot easier (and less financially stressful), so make sure the policy you purchase includes the cost of the structure and its contents, as well your extended stay somewhere else while your home is repaired.

Depending on where you live, you may want to consider different types of regional insurances. Take weather and natural disaster threats into account so your assets are covered in the event something occurs.

  • Flood Insurance: If you live in Texas, Florida, New Jersey, or other flood-prone states, you may want to consider adding flood insurance to your residential or commercial property insurance to cover a variety of losses that could be sustained due to flooding, heavy rain, melting snow, or levee dam failures.
  • Tornado Insurance: While hail or wind damage is often covered by home insurance, damage from high winds and tornadoes typically aren’t. If you live in the southern plains, like Texas, Kansas, and Nebraska, then you should consider adding this layer of coverage to your home insurance to ensure you’re covered in the event of a natural disaster.
  • Fire Insurance: This type of policy covers damages incurred by a fire, including your home and belongings. In some cases, it can also include expenses for your temporary housing and meals while you are in the process of moving from or repairing your damaged home. In areas like California, where wildfires are increasingly more common, this is a great policy to consider.

If you don’t own a home, you may want to consider renter’s insurance. With this type of policy, your personal belongings and living expenses will be covered in the event of a break-in, building damage, or other factors beyond your control. The structure is similar to that of home insurance, but you can ask specific providers what the coverage includes.

Automobile Insurance

Whether you’re driving a family hand-me-down or leasing a new Mercedes, automobile insurance is something you shouldn’t skip, and in most states, it’s required by law.

This type of policy will protect you if you are involved in an accident, someone in the vehicle is injured, or the vehicle is damaged through other means, like vandalism or a natural disaster.

Coverage varies by provider, so make sure you read a policy carefully before paying for the service. The policy you sign-up for will determine exactly what is covered in the event of an accident, and exactly how much money you’re eligible for.

Life Insurance

Life insurance protects your family or those financially dependent on you in the case of your passing. The structure includes the policy owner paying premiums over time, and the insurer pays the policy’s face value to the named beneficiaries on the account.

Please note that in order to receive the money, the beneficiaries must be formally listed, so if you welcome a new child to the family, you will need to ensure their name is listed as well in order for them to receive funds.

Different types of life insurance policies are important to consider when selecting a plan. Investopedia has articles that explain the differences.

  • Term Life Insurance
    • Decreasing Term: Renewable with coverage that decreases over the life of the policy at a predetermined rate.
    • Convertible Term: Allows policyholders flexibility to change term policies into permanent policies.
    • Renewable Term: A policy that increases annually and is usually the least expensive option to get started.
  • Permanent Life Insurance
    • Whole Life: This type of insurance accumulates in cash value over time, and can be used for many purposes, such as loans.
    • Universal Life: This is permanent life insurance that earns interest over time and includes flexible premiums.
    • Indexed Universal: Universal life insurance can build wealth over time while leaving a death benefit for beneficiaries on the policy.
    • Variable Universal: This type of insurance allows the policyholder to invest the cash value in a separate account, and also includes flexible premiums.

Disability Insurance

Accidents happen, and sometimes, they may prevent you from doing your job. In the case that something unexpected happens and you are without income, having long or short-term disability insurance ensures that you are covered for hospitalization and medical bills, along with other daily health expenses your paycheck would normally cover.

Many employers offer both long-term and short-term disability insurance as part of their benefits package, so review the coverage of both to understand your policy’s structure.

If your employer doesn’t offer disability insurance as part of their benefits package, you may want to purchase your own or supplement what is offered if it doesn’t meet your needs. Investopedia has a list of the best disability insurance to purchase here.

Identity Theft Protection

In an increasingly digital world, the threat of identity theft continues to rise. Different types of identity theft include bank account theft, tax identity theft, medical identity theft, and criminal identity theft.

Identity theft insurance policies can protect you by covering the funds lost in the process, and should be something you consider to protect your assets. Some banks and credit unions offer ID theft protection services for a small fee, but you can also purchase it on your own through companies like Experian, Identity Guard, or LifeLock by Norton.

While there are many policy options available, assess your lifestyle needs before signing up for every type of insurance plan. Only purchase what makes sense for you and your family, and talk to your employer about potential offerings available through employer-sponsored plans.

Remember, insurance protects your finances in the event that something unexpected happens, like a car accident or medical procedure. By purchasing different insurance policies, you will avoid dipping into your savings, emergency fund, or withdrawing money from your retirement account to pay for an unplanned event.

To learn more about the fundamentals of 401(k) language, check out the Slavic401k glossary guide.

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