Common Insurance Policies You Might Need
Insurance can simply be defined as a contract, whereby one party receives protection against losses and damages (financial or otherwise) from an insurance company. Insurance might be important for a range of people and reasons. In some cases it is a legality such as maintaining car insurance. Alternatively, some individuals might choose to take out optional insurance policies where they perceive the risk of loss or damage to be higher than the cost of the insurance policy.
Although insurance can be seen by some as an added cost and potentially slow you down when working towards a stronger financial position, it can also provide unmatched benefits, should the unexpected happen. Because accidents and unplanned events do happen, insurance is made to offset the costs associated with such events.
The typical cost of each insurance can vary, depending on a number of factors. Primarily, insurance companies will look at the risks involved or the likelihood of you needing to make a claim. Usually, if you can provide evidence that you are less likely to make a claim, you can end up paying a lower premium. The premium is defined as the amount you pay to be insured, typically on a monthly or annual basis. We’ll discuss some examples of this “evidence” in each insurance category below.
Depending on the policy, some insurance providers will set a “deductible.” This is the amount that the insured person must pay out-of-pocket before the insurer pays a claim. In theory, deductibles prevent small-and-often claims which might be less significant. The Insurance company will also set out a “policy limit,” which defines the maximum claim amount you are able to make over the stated policy period. Those who prefer a higher policy limit might expect to pay a higher premium.
Homeowners Insurance
The average annual cost of homeowners insurance in Tennessee for 2020 is $1,233. Unfortunately, this usually isn’t an optional cost; with many mortgage companies requiring this insurance or similar before a loan is granted. The cost of homeowners insurance can depend on:
The location of your home
The contents of your home
The condition of your home
Past claims history and more
Typically, homeowners insurance can cover you in a range of situations, but you should check which are highlighted in your personal policy. When deciding between insurance companies, it could be a good idea to check you are covered for all of the situations you might need. These can include:
Upon theft or break-in
Upon guest injuries on your property
Upon damage to the roof or walls, and more from a storm or fire, etc.
If you would prefer a lower monthly premium, you might be subject to a higher deductible, or if you would like the option to claim an unlimited number of times, a lower deductible might be more favorable for your position.
Auto Insurance
The average annual cost of auto insurance in Tennessee equated to $577 in 2019. There are quite a few different types of policy and coverage levels. Auto, insurance might cover you for liability (in the case of an accident), against uninsured drivers, personal injury protection, or comprehensive coverage in the instance of theft or vandalism, for example.
As previously mentioned, by law, there is a minimum required insurance policy when you drive on the road. This cost might be afforded by adding it to your monthly expenses, or some insurance companies might offer a discount for paying the annual price in full.
Umbrella Insurance
An umbrella policy kicks in on top of your home or auto insurance if you have a claim that is above what either of those policies may cover. It is not readily available to everyone and is typically only in place from those who purchase their home and auto insurances from the same provider.
Renters Insurance
You guessed it, for those who rent their living space instead of owning it, renters insurance might just be for you. The average annual cost of this in Tennessee was $218 in 2019. This is usually not a legal necessity, but some apartment buildings will require renters insurance before you sign the lease. Currently, 37% of the US population rent, but only 41% of these have taken out a renters insurance policy.
Renters Insurance covers many of the same things as homeowners insurance, in some cases:
Personal property damage and theft
Liability and medical bills
Building damage
Renters Insurance can be especially useful for those living in apartment buildings or shared accommodations. So many renters don’t think about the damage that may come from another tenant in the building. If there is a fire, the landlord is not liable for any of your stuff.
Life Insurance
The decision to take out life insurance heavily depends on values and how your absence would affect family members or dependents. Some people might perceive life insurance policies to only be needed in limited situations.
But in reality, life insurance can be useful in a range of different situations. Typically, it pays out a lump sum to a beneficiary upon death, or in some cases, when diagnosed with a terminal illness. The funds from a life insurance policy are often used to pay continued expenses that you would usually contribute to, such as a mortgage or other long-term fixed expenses.
Disability Insurance
Finally, there are several different disability insurance options available which might be private or offered through your employer. This type of insurance covers short or long-term injuries or illnesses to continue your income even when unable to work. Once again, this is an optional personal insurance, usually not required by law.
When searching for a good disability insurance policy, it could be useful to consider:
Which disabilities are included in the coverage
If there is a policy limit, is it based on monetary payout, your age, or a period of time
How soon you can begin collecting benefits after injury/illness onset begins
If you’d like to learn more about budgeting for insurance costs or choosing the right policy for you, let’s talk today. We offer full life and disability insurance from a variety of insurers. We are not tied to any single company and will work to find a policy that fits your needs and can help direct you on the others.