7 Types of Policies You Should Purchase From Insurance Companies
Did you know that the US is home to almost 6,000 insurance companies? Over one in four of these are property and casualty (P/C) insurers. Life/annuities and health insurance companies are the second and third most common.
The big question is, what exactly are the types of policies you should buy from these insurers? Are there even laws that mandate purchasing insurance coverage? If so, which ones are legally required?
On that note, we came up with this guide listing the essential types of insurance coverage you should get. Read on to discover all about them and which ones are mandatory by law.
1. Health Insurance
Since January 2019, health insurance is no longer mandatory at the federal level. However, some states, like California, have their own health insurance mandate. In fact, the Golden State reinstated the penalty for underinsured/uninsured Californians.
Massachusetts, New Jersey, Rhode Island, and D.C. have similar mandates. Vermont also passed a mandate in 2020, but the state doesn’t impose penalties.
Even if your state doesn’t require health insurance, you should still get covered. Health insurance policies help reduce out-of-pocket expenditures for most health care services. It helps pay for preventive services, including laboratory tests, check-ups, and screenings.
Health insurance coverage also protects you from the exorbitant costs of medical services. It can also help pay for emergency department visits and hospitalizations. Keep in mind that each year, more than 36 million people in the US require hospitalization.
2. Motor Vehicle Insurance
Motor vehicle insurance is a law in all but one state: New Hampshire. Virginia gives motorists an option to bypass it, but they need to pay a $500 Uninsured Motor Vehicle Fee. However, all 50 states have liability laws for drivers who cause accidents.
So, even if you live in NH or VA, you still need to prove you can pay for the damages you cause in a car crash. Otherwise, you’ll have your driving privileges suspended.
In any case, you shouldn’t go uninsured, seeing as the lifetime odds of getting in a fatal crash can be as high as 1 in 106.
Also, note that even just property damage can result in an average loss of $4,600. This goes up to a mean loss of $23,400 for a possible injury. One of the worst is a disabling injury, with an average economic burden of $98,400.
3. Dental Health Insurance
This type of insurance for the family isn’t mandatory, but you should still purchase it. For starters, most basic health insurance plans have little to no dental coverage at all. This is why for every adult without a health policy, there are three without dental coverage.
Dental health insurance provides coverage for preventive and restorative services. Preventive services include oral exams, prophylaxis (teeth cleaning), and routine radiographs (X-rays). Restorative services include dental fillings, extractions, and non-routine radiographs.
There are also full dental coverage plans that help pay for major restorative care. These include crowns, bridges, dentures, and in some cases, even implants. You’ll also find dental insurance that helps cover some orthodontic treatments like braces.
4. Homeowners’ or Renters’ Insurance
There are no federal or state laws that mandate these insurance policies. However, if you plan to apply for a mortgage, your lender will likely require you to insure your assets. These include your home and most of its contents.
You should maintain a homeowners’ policy even if you’re already mortgage-free. After all, it protects your home’s structure, detached structure, and personal belongings. It may even provide some level of coverage for your vehicle parked in your garage.
As for renters’ insurance, it’s not mandatory at a federal or state level, either. However, landlords often require it as part of the rental contract. It protects the property itself, as well as the renters’ possessions.
5. Life Insurance
About six in 10 people in the US have some form of life insurance. Of these individuals, 20% find their current coverage inadequate.
That should be enough to make you think about what could happen if you’re without a life policy.
Term or permanent life insurance can protect your family’s welfare in your passing. It does so is by paying out a lump sum death benefit to your beneficiaries after your death. With a permanent universal or whole life policy, though, you get an extra benefit of a “savings” account.
The savings component of permanent policies builds up over time, so long as you pay your premiums. It earns a compounding interest that can grow big enough for withdrawal after 10 to 15 years. You can then use this money you earned for personal purposes.
6. Disability Insurance
One in four US adults, or 61 million people, live with at least one form of disability. Most of them have mobility problems, while many others have cognition difficulties. The majority are older adults, but they also affect younger individuals.
In any case, having a disability can impair your employability or ability to earn a living. It’s even possible to be out of work for an indefinite period, which can leave you in financial distress. That’s on top of all the health and medical expenditures of treating a disability.
Disability insurance can replace some of your income if you sustain a disability. Most short-term disability policies provide coverage for about three to six months. Long-term disability insurance provides coverage for two to 10 years or even longer.
7. Flood Insurance
Flood insurance helps cover losses resulting from flood-caused water damage to your property. These floods include those caused by torrential rains, coastal storms, or river floods. Some policies may also provide coverage for damage caused by melting snow.
Flood damage isn’t part of the inclusions of most standard homeowners policies. For this reason, you’d need to purchase it as supplemental coverage.
Flood insurance is only mandatory for government-backed homes in high-risk flood areas. The same goes for homeowners who’ve already received federal disaster assistance. In both cases, the mandate is at a federal level.
Mortgage lenders may also require flood coverage as part of the loan agreement. This is especially true for homes in high to moderate-risk flood zones.
You should consider purchasing flood insurance even if you’re in a low-risk zone. For starters, everyone is at risk of experiencing a flood. In addition, a recent study found that at least 14.6 million US properties have a significant flood risk.
Don’t Skip These Essential Types of Policies
As you can see, motor vehicle and flood insurance are the only types of policies required by federal law. On the other hand, mandatory health insurance only applies to a few states. The rest can be a contract-based or personal requirement.
In any case, all these policies can protect you and your loved ones, especially in case of emergencies. So, the sooner you get insured, the sooner you can enjoy some peace of mind.
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Ben Stern wrote this article on behalf of FreeUp. FreeUp is the fastest-growing freelance marketplace in the US. FreeUp only accepts the top 1% of freelance applicants. Click here to get access to the top freelancers in the world.
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