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Insurance policies everyone should have

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Having a smart insurance strategy for your specific lifestyle provides you with financial protection when you need it the most. It also protects you in the event of unexpected disasters or accidents. You don’t have to go overboard with your coverage, but having essential insurance coverages makes sure you’re not caught off guard in an emergency situation. Find out how to figure out what kind of insurance policies you need, as well as some of the most useful types available.

What insurance do I need?

Not everyone needs the same combination of insurance policies. Instead, take a look at your assets and responsibilities to find the coverage that best suits your needs. For instance, if you’re the main breadwinner for several dependents, a substantial life insurance policy can protect them if you suddenly pass away. Here are some more examples of common insurance policies that may be worth it.

Renters or Homeowners Insurance

Renters insurance protects personal belongings and even your personal reputation. Liability coverage is one of the most important parts of this policy because even renters can be sued for losses or damages connected to rented properties. Imagine what would happen if you negligently burned your apartment building down, bringing down five other people’s homes and personal property along with it — or even lives. If you don’t have renters insurance, you probably can’t write checks to cover all of your neighbor’s losses and damages (on top of yours). It’s also highly unlikely that you could pay for personal injury and/or wrongful death lawsuits.

Homeowners insurance similarly covers you for liability. However, the actual structure of your home (in addition to your belongings) is also protected against damage from events like fire, theft and lightning. Plus, you’ll also get additional living expenses to cover your lodging if you can’t live in your house while it’s being repaired. 

Gap Insurance

In 2016, 765,484 cars were stolen, totaling a stunning $4.5 billion in personal property losses. It’s likely some of those car owners still owed on car loans originally used to purchase the cars. The same holds true if your car is totaled but is currently worth less than what you owe on your auto loan.

Without gap insurance, you’re responsible for paying off that loan even if the insurance company has written off your car. Regardless of the car, its sale price, or any other factors, anytime you take out a loan to buy a car — especially brand new or very expensive ones — you should purchase gap insurance.

Umbrella Insurance

Your homeowner and auto insurance policies offer liability coverage, but it’s normally only up to a certain amount. Have you ever considered what would happen if you got sued for more than your liability limits? You’d have to pay out of pocket and with the rest of any assets you have. An umbrella policy provides extra liability protection at an affordable cost — a $1 million policy will usually run anywhere from $150 to $300 a year.

Pet Insurance

If you love your four-legged friend, whether dog, cat, or something more exotic, you probably care for them like another human family member. If they get sick, treatment can cost thousands. According to the Americans Pets Products Association, $29.3 billion was estimated to be spent on veterinary care in 2020, a number that has been steadily rising. Procedures become increasingly expensive, and those formerly out of reach are now widely available. 

If you want to protect your pet, this insurance policy can help you save money in the long run, but do it now. Similarly to the underwriting guidelines of many insurance types, you want to obtain coverage as early as possible — don’t wait until your pet’s vision seems to be waning. Buy it when your pet is still healthy to help lock in premiums and discounts that may help if something drastic happened, causing rates to rise. There are several options to choose from, including basic coverage, comprehensive coverage and pet well care protection that covers your preventative care. 

Flood Insurance

According to the Insurance Information Institute, 90% of the nation’s natural disasters involve flooding, yet many homeowners and renters aren’t aware it’s not covered under standard insurance policies. You don’t have to live in a high-risk area to warrant buying a flood insurance policy either, as 20% of flood claims come from low- to moderate-risk areas. If you don’t have flood insurance, then damage isn’t covered. The average flood insurance claim in 2018 was over $42,000. While your annual premium depends on how prone your area is to floods, the cost is much less than the damage that can occur.

Shopping for insurance

Take your time in choosing your insurance company and comparing the amount of coverage you’ll receive versus the premium you’ll pay. When searching for multiple types of policies, consider bundling with a single company to save money.

Also make sure the insurer is in good financial standing. You can search AM Best to see their financial rating. A rating of a B+ or above is considered good, while anything less than that indicates financial weakness. 

Another good source of information on insurance providers is J.D. Power, a company that tracks customer satisfaction. Look up the insurer to see how they’re ranked on the claims process and the overall customer experience. The information is segmented into different types of policies so you can get a strong sense of what to expect when you pick a certain company. 

The takeaway

Insurance policies play an important role in creating financial security in your life.

  • Assets like your home, belongings and car should be protected from damage or loss. 
  • It’s also crucial to protect yourself from potential lawsuits with liability insurance.
  • Protect your furry friends with pet insurance so you don’t have to make care decisions based on money.

Not everyone needs every type of insurance policy. But evaluating your vulnerable areas in life helps to make sure that you’re covered when you need it the most.

Lauren Ward

Lauren Ward is a writer for Coverage.com. She specializes in all things personal finance, including insurance, loans, and real estate.

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