In 2018, the finance and insurance sectors in the US had a gross domestic product totaling $1.51 trillion. Auto insurance alone accounted for $287.16 billion of that figure.
In addition, US households also paid an average of $3,405 for health insurance in 2018.
With so much money on the line, you may be wondering if you even need all these types of insurance plans. Are they required by the law? If not, would it be okay to go without these insurance policies?
We’ll answer all these questions in this post, so keep reading to learn all about the policies you do need!
Auto Insurance
Unless you’re a driver in either New Hampshire or Virginia, the law requires you to carry this coverage. The Granite State and the Old Dominion State are the only two states where drivers can skip coverage.
However, uninsured NH drivers found at fault in a crash may have to cover all the damages they cause. This often includes damages and injuries that both drivers and their passengers sustain. Uninsured drivers who aren’t at fault can also incur high medical and hospital bills.
Car insurance in Virginia also isn’t mandatory, but those who’ll forego coverage needs to pay a $500 fee. This is only for the annual “Uninsured Motor Vehicle Fee“, which doesn’t have any coverage at all. As such, VA drivers who cause a crash will still be liable for all the damages or injuries they cause.
Health Insurance
As of January 2019, health insurance is no longer a federal requirement for US residents. However, it is still mandatory in California, New Jersey, Massachusetts, and Vermont. Other states, like Connecticut, have pending laws that will make health insurance state-required.
Health insurance, after all, can help reduce your out-of-pocket medical costs. With this type of insurance, you’ll pay less for covered health care services. Some preventive care services are even free, such as check-ups, screenings, and vaccines.
Keep in mind that experts project health spending to reach almost $6 trillion from 2020 to 2027. That’s a staggering 0.9% increase from 2019. If you don’t get your health insured, you might end up with sky-high medical and hospital bills.
Dental Insurance
Dental insurance is also a type of insurance plan designed to lower health care costs. Note that most standard health policies have little to no coverage for dental care. In fact, for every adult without a health plan, there are three adults without dental coverage.
This lack of insurance resulted in $53 billion in out-of-pocket dental care costs in 2017.
The thing is, poor oral health won’t only put you at risk of dental decay and gum disease. For instance, scientists have found a connection between gum disease and heart disease. Other studies have also found evidence between tooth loss and a higher risk of heart failure.
All these should be enough reason to invest in a comprehensive dental insurance plan. By doing so, you’ll spend less on getting the dental services you need whenever you need them. This can then help improve your oral and overall health.
Homeowners’ or Renters’ Insurance
Homeowners’ or renters’ insurance aren’t required on a federal or state level. Most mortgage lenders, however, usually require their borrowers to have homeowners’ insurance. It’s also legal for landlords to make renters’ insurance mandatory for their tenants.
Even if you already 100% own your home or your landlord is lenient, you should have home insurance. Among the different types of insurance claims, those made for homes are some of the most common. In 2017 6% of all insured homes filed a claim, with homeowners’ losses averaging $12,474.
$12,500 is a lot, especially considering that almost six in 10 US adults don’t even have $1,000 saved up. If your uninsured home gets hit by a burglar, you’d have to replace your belongings using your own money. The same goes for damaged property caused by accidental water discharge or overflow.
Flood Insurance
Most standard home policies exclude flood damage coverage. You’d need to buy this as a separate type of insurance policy, especially if you live in a high-risk flood zone. Even if you live in a low- or moderate-risk zone, consider insuring your home with this policy.
Why?
First, because the yearly frequency of flooding in many parts of the country has gone up by over 250% since 2000. Second, new research has found evidence that 100-year floods could now hit the US every year. Third, the heaviest rains now dump 20% more precipitation compared to 100 years ago.
You can read more here about how vital flood insurance is, but the bottom line is, you should get coverage ASAP. This way, you’ll get coverage for rebuilding your home in case of flood damage. Flood insurance can also cover the cost of replacing your damaged belongings.
Life Insurance
Life insurance is a type of insurance that most people need, or at least according to 85% of Americans. Despite this, only 59% of them actually own a life insurance policy.
Of the five different kinds of insurance listed here, only life insurance is “optional”. No law — be it federal or state — mandates this coverage. However, it’s still something that you should buy to protect the future of your family.
One real-life example of the benefits of life insurance is mortgage repayment. While most home loans aren’t transferrable to “heirs”, the remaining debt won’t go away. As such, if your family wants or needs to stay in the mortgaged home, they need to keep paying the mortgage.
They may have a hard time doing that with you gone, especially if you’re the primary breadwinner. In this case, they’re at a huge risk of losing the roof over their heads.
This is only one example, but as you can see, life insurance is worth it if you have a family. Besides, there are even some policies that set aside part of your premiums into a savings account. This will then earn interest over time, and within, say 10 years, you can withdraw or borrow against it.
Prioritize Getting These Types of Insurance Plans ASAP
The types of insurance plans discussed above are only five of the 30 types available in the US. However, they should be the first on your list of must-haves as a regular consumer. These five are the most important and most useful to individuals and families.
So, as early as now, be sure to start shopping around for and comparing premiums! The sooner you do, the sooner you can reduce your health, safety, and financial risks.
Ready for more tips that can help up your financial game? Then be sure to head over to this site’s Toolkit section!