5 Types of Insurances You Need to Protect Yourself From Financial Turmoil

Here’s the deal about insurance—nobody gets excited about it until they have to use it.

A couple of year ago, we had significant water damage on the first floor of our home. For this post, I will simply refer to it as the Great Rainer Flood of 2014. I won’t go into details, but let’s just say that our 4-year old figured out how to clog a toilet. The damage was so bad that both our floor and our subfloor needed replacing. It was a mess.

In all of my years as a homeowner, I never needed to use our homeowners insurance. So, naturally, I was never really enthused about having to pay for it. Until the Great Rainer Flood of 2014.

When I realized the extent of the damage to our floors, my attitude experienced a dramatic shift. Sure, we could have paid for it out of our emergency savings, but it would have been costly and damaging to our financial picture. I suddenly became incredibly grateful for my homeowners insurance.

And I am grateful for my other insurances as well.

My hope is that your need for any type of insurance is rare. But chances are good that, at some point, you will need the coverage.

So let’s make sure you have your basic insurance needs covered. Here are 5 types of insurances you need to protect yourself from financial ruin:

  1. Health insurance. Yes, if you are young and healthy you still need health insurance. Even the most basic healthcare can be costly. Every year, a large percentage of personal bankruptcies are directly tied to unpaid medical bills. Health insurance can help cover a significant portion of your healthcare costs and help protect you against a downward financial spiral.
  1. Homeowners/renters insurance. The cost of replacing your home is high. Should a catastrophic event occur, replacing a home would be difficult, in not impossible, for many. Of course, you do not just need insurance for total replacement. You may need it to replace your floor because of significant water damage from the Great Rainer Flood of 2014. If you rent, make sure to get renter’s insurance. It covers you personal belongings in the event of fire, water damage, and theft.
  1. Car insurance. First of all, it is illegal to drive without car insurance. So at the very minimum, you need car insurance to drive legally. Second, you need liability coverage. Don’t skimp on this. Car repair and medical costs can ruin your finances if you are not properly covered. If you are looking for a way to bring down the insurance’s cost, opt for a higher deductible. Your deductible is is how much you pay before the insurance kicks in.
  1. Life insurance. Life insurance typically pays out a lump sum in the event of your death. If you are married and/or have kids, you need life insurance. This insurance is even more important if you are the primary source of income for your household. The reality is that we will all die. I cannot guarantee sickness, a house fire, or a car wreck, but I can guarantee death. As much as you may want to ignore it, it will happen. We just don’t know when. Life insurance can alleviate the significant financial strain caused by losing a loved one. So care for your family and prepare for reality by getting life insurance.
  1. Disability insurance. Disability insurance kicks in if you are physically unable to work. Like life insurance, disability insurance becomes increasingly important if you have a family and are the primary wage earner. Short-term disability insurance typically covers you for 6 months while long-term disability insurance typically covers for 2 years or until age 67. Coverage terms may vary, so please look carefully at your policy before purchasing. If you can only afford one, go with long-term disability.

Insurance protects you and your family from having your finances destroyed, so it is wise stewardship to have these safeguards in place.

Learn from my experience with the Great Rainer Flood of 2014. Get insurance. When an unfortunate event occurs, you will be glad it is there.

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