As you progress in your life, there are an array of financial decisions to make. When you’re on a budget, these considerations can add a layer of complication. One big financial consideration is determining which types of insurance are necessary for you to obtain.
There are many types of insurance to consider throughout different stages of your life. However, if your income is below $30,000, you may feel overwhelmed when deciding which insurances are right for you. If you don’t have extra room in your budget for multiple monthly payments, take time to research which insurance policies are the most critical to have.
Types of Insurance
It’s important to understand the benefits of the different types of insurances before securing coverage. Any insurance policy will act as a safeguard to protect you and your finances from unexpected events. When narrowing down the coverage you want to secure, take into consideration your lifestyle and your budget. Each situation is unique and moreover, your insurance needs may shift as you enter different phases of your life. You don’t necessarily need to pay for every type of insurance that exists, but there are a few to consider.
Health Insurance
One of the most common types of insurances to have is health insurance. Paying for healthcare out of pocket can be expensive, especially if you see multiple doctors. Health insurance pays for medical bills incurred in exchange for a monthly premium. Many health insurance companies also will pay for routine and preventive care.
It’s important to see your doctors regularly to catch any health concerns so they can be addressed. If you don’t get sick often and you don’t want to pay a monthly fee, you might be thinking, “do I really need health insurance?”
When it comes to a medical emergency or unexpected health condition, having this type of protection is critical. Health insurance is important to protect you from a large financial burden that can arise from medical bills.
When you have health insurance that covers routine care, you are also less likely to skip out on preventative appointments due to a cost concern. Attending routine appointments is crucial to maintaining optimal health.
When considering health insurance, first start by looking at the benefits your employer offers. You also may want to compare the rates of your employer with that of your spouse’s. Make sure to choose the plan that fits with your needs and the needs of your family.
If you’re unable to obtain health insurance through your employer, using the government’s online marketplace is the next place to look. The marketplace can adjust your premiums based on your income, making shopping for health insurance on a budget easier.
Life Insurance
Life insurance is another type of important insurance coverage that is easy to overlook. While it isn’t the easiest thing to think about, nothing in life is guaranteed. This is why having coverage set up to financially protect your loved ones if you’re unable to do so is essential.
If you’re young and healthy, life insurance may be the last type of insurance on your mind. You might not see a need to spend money on this insurance plan if your life is just getting started. However, in many cases, it’s an important coverage to have to protect your loved ones and their futures.
If you have children or dependents, life insurance can give them financial security. While life insurance won’t do much for you personally once you’re gone, your family will have the financial protection they need to continue living a comfortable life.
Nothing will replace physically having you here, but having life insurance means finances are one less thing to worry about. With a life insurance plan, your family can avoid financial burden in the unfortunate event of your passing. A life insurance plan could help cover funeral and burial expenses through the death benefit. Additionally, this plan can help cover some of your family’s monthly expenses that your salary contributes to.
Some companies may offer a life insurance policy to their employees. While this plan might help cover some expenses, you may need a separate policy to cover all of your obligations.
When you’re looking into life insurance, you’ll first need to decide on the type of plan. A term life insurance policy is a great plan to consider if you’re on a budget. Term life insurance can be less expensive to secure than whole life insurance. Unlike permanent life insurance, term life insurance lasts for a specific time period (a term), and the plan would pay a lump sum to your family in the event of your passing.
You can purchase additional protection to add-on to your policy, but a typical time period for protection lasts 20 or 30 years. Your monthly or yearly premium for a term life insurance policy is determined by your health and demographics. Factors like your age, gender, and habits can come into play when calculating your premium.
After you’ve decided which type of plan you’re going to get, the next step is determining the coverage you need. To choose a coverage amount for your life insurance plan, multiply your annual salary by 10.
You’ll also want to take into consideration your monthly expenses and responsibilities when deciding on coverage. If you provide childcare duties in addition to your career or job, you’ll want to account for childcare expenses. Additionally, if your partner or dependents would need to pay to cover a task that you do, it’s important to consider when determining coverage.
Auto Insurance
If you own a vehicle or have a loan on a vehicle, auto insurance is another necessary plan. Car insurance can help protect you in the event of an accident, to help cover medical bills and repairs. If the accident involves another driver, insurance can also help with legal fees if needed. If you own your vehicle outright or lease, you’ll still want to be an insured driver.
When you have a loan on a vehicle, lenders will require both comprehensive and collision coverage on top of your state’s minimum requirements for auto insurance. When you don’t own your car outright, any accidents or damage can be a liability to your lender. If you purchase your in cash, you can go a cheaper route and only obtain the state’s minimum required coverage.
Even if you own your car, if it’s newer, you might still want to secure cover collision damage. If your car is older and prone to issues, you might not want or see the need for collision damage. If your car needs frequent repairs, you may want to add rental car reimbursement or roadside assistance to your policy.
If you don’t already have auto insurance, you should be able to get a quote now into your monthly budget. You’ll want to consider your needs as a driver and a vehicle owner when looking into auto insurance. The type of coverage you obtain will likely have to do with the cost and condition of your car.
Home and Renters’ Insurance
Whether you live in a home or an apartment, homeowners or renters’ insurance is another critical type of coverage. To protect both your belongings and your physical space, having this type of policy set up is critical.
Homeowners Insurance
If you’re a homeowner, homeowners insurance will financially protect you in the event that something unexpected happens to your home. While homeowners insurance might not be required by law like auto insurance, your mortgage lender will probably require it. Throughout your mortgage term, you’ll likely be required to have homeowners insurance by your lender.
What does homeowners insurance cover?
- Damage to your home:
- Fire damage
- Hail or wind damage
- Water damage from internal sources (not flooding)
- Theft of personal items
- Roof damage caused by snow and ice
- Explosions
- Auto or aircraft damage to your home
- Personal liability
- Medical bills for minor injuries that occur on your property.
- Legal fees if you’re sued for accidents that occur on your property.
While homeowners insurance will often cover the cost of rebuilding your home if necessary due to damages, you’ll need separate insurance for damages caused by floods and earthquakes. If your area is susceptible to that type of natural disaster, you’ll want to look into additional coverage.
Renters’ Insurance
When you don’t own your own home, you might not think renters’ insurance is necessary. When you’re on a budget, the extra cost of protecting a property you don’t own might not seem appealing. However, renters’ insurance financially protects you and your personal belongings in the case that something goes wrong while renting.
What does renters’ insurance cover?
- Natural disasters
- Hail, fire, rain, or wind storm damage.
- Lodging if your apartment is uninhabitable
- Hotel room while you look for a new place to live.
- Your personal belongings
- Your valuables inside and outside of your apartment.
- Theft
- Keep in mind that your more expensive items (art, jewelry, or electronic equipment) might need additional coverage
- Personal liability
- Medical or legal bills in case someone gets injured in your apartment.
Like homeowners insurance, renters’ insurance won’t cover damages caused by earthquakes or floods. It also won’t cover loss if you accidentally lose a personal belonging. If your pet damages your apartment, you’ll have to pay to repair those damages out of pocket. Your policy also won’t cover your roommates’ valuables. Your roommate would need their own policy to protect their personal belongings.
Next Steps
Once you’ve looked into your different options of insurance, the next step is signing up for each plan you need. Set up a spreadsheet and add each monthly premium to your monthly budget. See where the premiums fit into your expenses, and adjust your spending habits accordingly.
Adding another monthly payment onto your list of expenses might not always seem necessary, but the cost is worth the protection. When things are stable, insurance coverage does not always seem worth it but if something does happen, you will be thankful to have this safeguard set up. Research which plans are best for your current need and your future needs to promote overall stability and security.