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3 Types of Insurance You MUST Have At All Times

Have you availed any of these insurance? Whether or not you have had it figured out, you have to realize that having insurance is essential. Even though we don’t want unfortunate accidents or unexpected events to happen to us, it’s better to be prepared rather than struggle financially.

Related Post: Why is Insurance an Essential Part of Financial Planning?

What & How Much?

There are many types of insurance, so I’m going to focus on the types that are most important for individuals and families.

Every person’s insurance needs is different, so choosing the correct insurance policy is a highly personalized task. It begins by assessing your lifestyle and the certain risks (or threats) you may face. Next, prepare a rough estimate of how much these risks are likely to affect you financially.

As a general rule, you will need:

#1 Life Insurance

Life insurance must be your number one insurance priority especially if you are the main breadwinner of the family and want to safeguard your dependents in case of your unexpected death or disability. You can either get a term life insurance OR whole life insurance.

Term Life Insurance is inexpensive (and the cheapest option). You pay a premium in return for a lump sum payment if you die within the policy duration. If you don’t die, at the end of the term, you get nothing. It is a good choice if you want coverage only for a short duration – otherwise you can renew the policy as much as you are allowed to.

Whole Life Insurance covers you your entire life and you can withdraw the entire cash value of the policy or borrow from it. With whole life insurance policies, you pay higher premiums in exchange for permanent lifetime coverage.

#2 Health Insurance

Health Insurance is something almost everyone needs as the cost of healthcare gets higher and higher. The purpose of health insurance is to cover and reduce the cost of health-related expenses. A good health insurance plan saves you money and protects you from having to pay in full for high medical expenses, now or in the future.

This type of insurance is usually offered by Health Maintenance Organizations (HMOs).

#3 Critical Illness Insurance

This type of insurance typically gives you a lump-sum cash payment if you are diagnosed with one of the illnesses specified in your critical illness policy. Critical illness insurance also helps fund recuperation aids, and even replaces lost income due to decreasing ability to earn. While you cannot predict a major illness with absolute certainty, you can check your family history for hereditary disorders and estimate the age when these conditions develop. Get critical illness insurance at an early age before disorders creep in and multiply the cost of health cover.

This type of insurance is offered by life insurance companies and fills the gap that Health Maintenance Organizations (HMOs) cannot provide.

Other Types of Insurance You Might Consider

  • Long Term Care Insurance helps you maintain your financial independence without burdening your family during your retirement years especially when it comes to hospital and nursing care.
  • Income Protection Insurance pays out a guaranteed cash amount (on a monthly or annual basis) to your dependents for a certain duration in case of your death or terminal illness. Your family can use the guaranteed cash benefit to help pay for daily living costs, including household expenses, food, rent, and utility bills.
  • Travel Insurance covers your medical and other related expenses while on a trip overseas
  • Mortgage Redemption Insurance is a form of life insurance that pays off a part or the whole of the insured’s outstanding mortgage balance in case of his or her death or total disability.

One of the benefits of getting an insurance policy early on is that it will likely cost you less now than later. Plus, you have no idea if your health might change, which could make getting coverage much more expensive or even impossible later on.

photo credit: Of War via photopin (license)

2 thoughts on “3 Types of Insurance You MUST Have At All Times

  1. I have been crawling the web recently for quality personal finance blogs to bookmark as I gain so much interest in financial planning. Actually, I started blogging this January and came online with iMillennial, my public journal. Recently, I included your site to my top list of personal finance sites in the Philippines and I don’t think I would regret it. Thank you so much. Let’s make a FINANCIAL LITERACY REVOLUTION!

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