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Insurance Basics

Insurance Basics

Youve been saving for years and making good progress toward your retirement and other investment goals. But a single catastrophic event like major storm damage to your home or a serious car accident can quickly derail your financial plan. Thats why having adequate insurance protection is a cornerstone of financial wellness. 

Many different types of policies are available. To help ensure you have all the protection you might need, its important to understand the options. 

Homeowners insurance. A homeowner's insurance policy can protect you from losses due to fire, theft, storms and other perils. And when there’s a mortgage on the property, it’s typically a lender requirement. 

Renters and condo insurance. Both of these types of policies can offer some of the same protection as homeowners insurance but are tailored to the specific needs of renters and condo owners. Condo owners, for example, don’t need as much structural coverage as homeowners. Renters primarily need insurance to cover belongingsand certain liability claims and it’s often the least expensive of the three types of policies. 

Flood insurance. Damages caused by flooding are generally excluded from standard insurance policies, so you’d most likely need to purchase this type of coverage separately. Even homes outside of flood zones can be susceptible to flooding. 

Auto insurance. Car insurance can protect you from unforeseen losses resulting from accidents, storms, theft and vandalism as well as property damage and injuries to yourself or others. Coverage requirements can vary by state, so its important to carefully review the terms of your policy.   

Boat, motorcycle and RV insurance. Operating watercraft and vehicles other than your car carry unique risks and require separate policies of their own. They may also include coverage for belongings stored on them. 

Health insurance. Preventive care, as well as treatments for diseases and other conditions such as diabetes and asthma, are covered by private or employer-provided policies. The Affordable Care Act guarantees 10 essential health benefits, including mental health treatment, maternity care, lab work and ambulatory and preventive services. 

Life insurance. Purchase this type of protection to safeguard the financial future of those you love should the unthinkable happen. Term policies typically cost less and pay a benefit for a certain number of years, while whole life policies cover an entire lifetime and can accrue cash value. 

Umbrella policies. You can obtain extra liability coverage beyond the limits of other policies — such as homeowners and auto policies — with this type of insurance. Umbrella coverage is often sought after by higher net worth individuals with more assets to protect. 

Disability insurance. If youre unable to work due to illness or injury, short- and long-term disability coverage can help protect your income. You may have a policy provided through your employer, but you can also purchase disability insurance individually.  

Pet insurance. This type of policy can help offset expensive veterinary treatment for your pets. But be sure to look into what conditions or treatments are excluded. 

Insurance Can Be Complex, So Get Help  

While your declaration page can give you an overview and a good starting point for understanding your policy, many important details are in the fine print. Thats why you should understand the specifics and do your homework on:  

  • Coverage limits. 
  • Any exclusions. 
  • Your deductible (what you have to pay out of pocket before coverage begins). 
  • Whether your policy reimburses according to actual cash value (depreciated value) or replacement value (cost to buy new). 
  • Any waiting period before coverage kicks in. 

Effectively knitting together adequate protection from a variety of policies can mean the difference between financial security and financial peril. With such high stakes, it can be highly beneficial to get advice from a qualified financial professional or licensed insurance agent to help ensure you have the types and amounts of coverage you need. The time to act is before disaster strikes because insurance helps protect your financial future and the things you value most. 

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