Four Types of Insurance and Why You Need Them

There seems to be an insurance for every situation these days. Believe aliens will invade earth one day? Farmers Insurance offers coverage in the event of a UFO crash. If you are a celebrity, you may want to insure a famous asset of yours, like Julia Roberts’ smile, for example. These are some unusual insurance situations, but you should know about the most common, and more practical, insurances available.

Health Insurance
Most people know they need to have some kind of health insurance. Whether you’re a dependent of a parent, you get coverage through your employer, or you find a plan through the Market Place, health insurance is an extremely important insurance to have, and it’s a government mandate.

Life Insurance
Having life insurance means if something were to happen to you, you would be providing your beneficiaries with money to help make up your income, fund children’s educations, pay off household debts, pay funeral expenses, and more. This type of insurance is a contract with an insurance company that says in exchange for premium payments, the company will provide lump-sum payments to these beneficiaries upon the insured’s death. There are different types of life insurance, such as term, universal and whole. Which type is right for you depends on your individual situation.

Long-Term Disability Coverage
Over 37 million Americans are classified as disabled; More than 50% of those disabled Americans are in their working years, from 18-64 years old. On average, a long-term disability absence from work lasts 34.6 months to nearly three years, according to the Council for Disability Awareness. LTD is like paycheck insurance. It pays if you are disabled and can’t work. It usually starts paying after 90 days and will generally pay for 5 years, or up the insured’s Social Security retirement age. While some people may have savings to support themselves a short time, very few could afford to stop working altogether for more than a handful of months. If your employer does not offer group disability insurance, you may want to consider an individual policy.

Short-Term Disability Insurance
Like long-term disability insurance, if you are sick or injured and can’t work, your policy would pay a portion of your income. However, instead of paying for years, it is limited to a shorter period of time (generally up to six months). This type of policy is particularly useful for people who live paycheck to paycheck and could not support themselves if they couldn’t work for a short period of time.

As always, it’s important to do your research and compare plans to see which one best fits you and your situation.

-       Written by Annie Albrecht, Worley Erhart-Graves Financial Advisors