As we are beginning to budget, it might be tempting to skip out on insurance. After all, insurance is not something tangible, like food or shopping. That said, buying insurance is important in terms of protecting oneself from financial crises if any mishaps happen. A good baseline in terms of buying insurance is to think about what you cannot afford to lose. For the typical individual, this encompasses life and health insurance, renters insurance, and car insurance. Generally, a monthly premium is paid to keep your insurance policy active.
Life insurance protects your loved ones in the event of your death. It helps to cover expenses like funeral costs, living expenses, outstanding debts, and future financial needs. A general rule of thumb for your life insurance coverage is 8-10x your salary. Employers often offer life insurance so make sure to check if this option is available to you and elect beneficiaries accordingly.
Health insurance covers medical treatments for individuals. It is often sponsored by employers but individuals can buy their own policies as well. Health insurance can be tough to navigate with sticky guidelines on specific “networks” of medical services you can access and various out-of-pocket costs, such as deductibles and copays. When budgeting, be sure to consider unexpected out-of-pocket expenses, fixed premium payments, and minor routine out-of-pocket expenses.
Renters insurance provides protection for your personal belongings should an event like fire or theft were to occur. Renters insurance also protects you and your guests from unintended damage, a part of renters insurance called liability protection. Renters insurance is typically very affordable and highly recommended, even for college students or recent graduates who may only need to purchase a very basic protection policy.
Auto insurance protects you in the case of financial loss due to accidents involving your vehicles, and it is illegal to drive without one in most states. Car insurance comes in different packages, but generally, a typical policy will include liability coverage (for at-fault accidents covering injuries/damages to the other party), medical payments coverage (for individual medical expenses), uninsured motorists coverage (for accidents where the other party does not carry an insurance plan), and coverage for damages to your vehicle.
When looking for insurance plans, it is ideal to “shop around” and to look into what lines of insurance certain companies specialize in. Be sure to compare features, benefits, and premiums, and do not let price alone sway you towards one policy versus another. Read the coverage details thoroughly to ensure that it covers what you need.