5 insurance policies you didn't know you needed

5 insurance policies you didn't know you needed

Most people are familiar with insurance. Are you a car owner? Then you know you have to wear cover to be on the road. Have you ever borrowed money to buy a house? Your lender probably required you to get homeowner insurance to protect this big purchase.

Although these seem like enough, the truth is that there are five other types of insurance that you should consider to adequately protect yourself and future incomes.

We'll discuss them, but first let's talk about why insurance is so important. 

Why is it important to have insurance cover?

Think of insurance as a protection for your wallet.

With the right coverage, you can potentially save a ton of money in the event of an emergency, unplanned Slife situation, or medical needs. Car insurance can pay the cost of a car wreck, such as repairs and medical bills. A homeowner's policies can help you rebuild your home after a devastating fire. Health insurance can pay expensive emergency admissions bills after an injury or illness. 

In return for paying money (premiums) to an insurance company, you will receive coverage. It means you can protect yourself without having to influence your long-term financial plans. Not enough insurance can derail your financial goals, and you definitely don't want that.

Before you sign up for additional insurance coverage and add new premium payments to your budget, you need to make sure that coverage makes sense for your life situation. You also want to make sure that the additional monthly costs are reasonable. You don't want to make monthly insurance payments if you don't necessarily need it.

Since most people already have auto and homeowner insurance, we won't try to convince you why you need it. Instead, there are five additional types of insurance you need – and you may not have considered otherwise.

1. Life insurance

Life insurance must be taken into account if you have other people who depend on your income – such as a spouse or children – or if you have large financial obligations such as mortgages, child-rearing costs, or larger debts. Sometimes you even need one when you get a small loan.

The purpose of life insurance is to grant your relatives a flat-rate (and usually tax-free) payment in the event of death. How much life insurance you buy is a personal decision, but generally it depends on the number of years of income you want to cover for your household after your death.

The two most popular insurance products you come across are life insurance and all life insurance:

Life insurance

Life insurance, as the name suggests, is only valid for a certain term or a certain one-year insurance (e.g. 10, 20 or 30 years). As long as you pay your premiums and keep your policy active, your beneficiaries should receive a lump sum in the event of death.

If you survive your insurance term, coverage expires and you can either renew (if offered) or apply for a new policy. Premiums can be affordable, but they become more expensive as you get older.

Whole life insurance

All life insurance will keep you alive as long as you keep up with your premium payments. It can also offer benefits such as a form of savings or investment account associated with it. Over time, you can get money credited. This type of life insurance sounds attractive, but it is also much more expensive. Here are some sample rates to compare. 

Regardless of what kind of life insurance you choose, you want to make sure that you fully understand what to do with each, how much coverage the premium offers, and whether there are any conditions or requirements.

2. Long-term incapacity insurance

This insurance covers you by replacing your income if you are unable to work due to permanent or temporary disability. Whether you are dependent or not, if you have monthly living costs, then it is a good idea to consider disability insurance.

What about short-term disability insurance? Well, if you have a fully funded emergency fund, then it could cover you if you can't work for a while. However, adding short-term disabilities may not be a bad idea, depending on the cost – especially if your employer offers them at low cost or for free. It can help you keep your emergency savings intact, in exchange for the monthly premium you pay for coverage.

3. Tenant insurance

If you rent, you are not responsible for the building itself or major repairs. This is the responsibility of your landlord. That being said, they definitely want to consider getting tenant insurance to cover your valuables in your home.

Tenant insurance protects you if your belongings are damaged by floods, fires or in case your house is broken into. That's why it's a good idea to take stock of your stuff – like your expensive electronics or musical instruments – to know how much protection you actually need so you don't pay too much.

Your electronics and other valuables are the things your tenant insurance would cover. Tenant insurance also covers items stolen from your vehicle, even if it is parked from home.

4. Personal item insurance

Do you have an expensive engagement ring or wedding ring set? An expensive watch? A laptop that you take with you everywhere? The cost of replacing items like this can be really expensive. 

So if you have any personal items that are of value and you often have them outside your home, you should definitely consider definitely insuring them through a personal item policy. You may even be able to add a floater to an existing policy to cover valuables such as jewelry (ask your tenant or homeowner's insurance). This ensures that you can replace them if they are lost or stolen without suffering major financial setbacks.

5. Pet insurance

60% of Americans have a pet of some kind, and people often don't think about the medical costs associated with bringing a pet. Pet parents should expect at least a bill of between 2,000 and 4,000 US dollars for emergencies during the life of their pet, according to the ASPCA.

Pet insurance can save you a lot of money if your pet needs a major operation or has expensive medical care, so there's definitely something to consider. Please talk to your veterinarian to find out what policies are accepted in your office before purchasing a cover.

Choose what's best for your situation

Conclusion: Make sure that any additional insurance you receive makes sense for your life situation and that the monthly cost of coverage fits into your budget. The potential payout from an insurance policy should far outweigh the cost you will pay to have coverage over time.