The 5 Insurances Everyone Needs

KristiLyn Wilkinson, AFC, Empowering Financial Wellness Program Manager

​Let’s talk about insurance. It’s important. The problem is that there are A LOT of different types of insurance out there. Some of them you really need, and most likely don’t have or at least don’t have enough coverage, and some insurances you might have, but likely don’t even need. We often jump to retirement and investment planning before we make sure that we have adequate coverage. This is an unfortunate thing because all it takes is one accident or set-back to completely derail your financial life if you aren’t adequately insured. So, let’s talk about the 5 insurances that most everyone needs. I say most because maybe you don’t own a car so therefore, you don’t need car insurance, but most people own a car, so go with me on this. 

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1. Health Insurance: This one is huge. We have become accustomed to insurance paying out for doctor visits, prescriptions, all the things, etc. Health insurance (as with most insurance) is meant to protect you from big catastrophic events. So even if you are healthy and never go to the doctor, you still need a bare bones policy that protects you from having to pay everything in an emergency. For example, I had twins with a rare syndrome that is fatal. We were flying from Utah to LA to meet with all kinds of specialists, I ended up on hospital bedrest, and the twins came 9 weeks early and spent time in the NICU. Our total medical expenses from that ordeal were over $650,000. Luckily, we had insurance that left us liable for only $15,000 of the cost. $15,000 is still not an insignificant amount of money, but one can recover from $15,000 much more easily than they can a couple hundred thousand dollars. If you are human, at some point in time, some part of your body (or your child or spouse's body) IS going to fail you. Make sure you have adequate insurance for when that happens. 
   
2. Homeowners Insurance: If you own a home, you need homeowner’s insurance. If you have a mortgage on your home, the lender will likely require you to have replacement cost coverage on your home and will allocate part of your monthly payment to go towards the escrow account that pays your policy. One thing to note is that floods and earthquakes are not covered under your homeowner’s insurance policy. They require separate policies. If you have outside water that runs into your house (say a sprinkler pipe breaks and floods your window well and damages your basement) that is considered outside water and would not be covered by your homeowner’s insurance policy. Water that breaks within your home and causes damage (I’m looking at you leaking fridge) would be covered by your homeowner’s insurance policy. If you live in a flood zone your lender may require you to get flood insurance. Just be aware that if you live somewhere where floods or earthquakes are likely to happen, it’s something you should make an intentional decision about whether you get that coverage or not. You can talk to your insurance representative and they can connect you to companies that offer flood and earthquake insurance.  
3. Car Insurance: If you own a car, you guessed it, you need insurance. Unfortunately, the state minimum requirements for coverage are not high enough to really protect you in the event of an accident. Talk with your insurance representative about how much car insurance coverage you need. You always need liability coverage on your vehicle. This coverage is what protects you in the event that you cause an accident and mangle yourself and a bunch of other people. You may not, however, need comprehensive and collision coverage if you are driving an older car.
   
4. Life Insurance: If you are alive, and you have dependents that depend on your income or depend on you to cook their food, clean the house, do their laundry, and drive them everywhere, you need life insurance. How much life insurance you need depends on your values and goals and your current financial situation. Too many women mistakenly think that they don’t need life insurance because they are a stay-at-home mom, but if something happened to you and your spouse was left with four little kids, wouldn’t he have to hire a lot of help to do all the things you used to do while he is at work all day? Mine sure would. The good news is that you can buy term life insurance and it isn’t that expensive. There is no time like the present to make sure that you have life insurance and that you have enough life insurance. 
5. Disability Insurance: Disability insurance covers a portion of the income lost when you cannot work due to illness, accident, or injury. During your working years, it is more likely that you will face a disability than death. There are two types of disability insurance, short-term and long-term. Check with your employer to see if you have any disability insurance coverage through them. If not, you can get a policy through a private insurance company. 

 
There you have it, the five insurances that most everyone needs. As I said in the beginning, you likely have a lot of this coverage already, the question is whether you have enough coverage. Insurance is not a one and done thing. As your circumstances change that could impact how much coverage you need. Take some time to review your coverage and make sure it is sufficient. Your future self will thank you because it is not “if” you ever have any emergency it’s “when”. 
 
Source: Garman, T., & Forgue, R. (2018). Personal Finance. Boston, MA: Cengage