There are many types of insurance policies. JOSEPH INOKOTONG reports that the right type of insurance for anyone depends on a number of factors including their goals and financial situation.
Insurance encompasses a broad topic that entails protections of homes, cars, boats, personal health and life itself. It is designed in such a manner to protect against financial loss resulting from unforeseen circumstances by sharing or pooling the risk of loss with other policyholders.
Its importance in everyday life is tremendous. Due to this, Lisa Smith lists five insurance policies everyone should have. To make it comprehensive and relevant to the changing dynamics of the world, Eric Estevez puts the finishing touches to them in the form of a review.
According to the duo, an insurance policy can protect one from the hazards of normal life, floods, fires, car accidents and life-threatening illnesses. They noted that no one can stop disasters from happening, but a good insurance policy can provide financial coverage for these unexpected expenses.
Indeed, protecting one’s most important assets is an important step in creating a solid personal financial plan and the right insurance policies will go a long way toward helping safeguard your earning power and possessions. This article discusses five policies everyone should not do without.
It is pertinent to state that one should choose a disability policy that provides enough coverage to enable the policy holder to enjoy his/her current lifestyle even if it is no longer feasible to continue working. To protect the people that are financially dependent on you, life insurance should be high on the list of required insurance policies. This is imperative because the soaring cost of medical care is reason enough to make health insurance a necessity, especially in this era when fuel subsidy removal has triggered sharp increases in the prices of goods and services in the country.
Similarly, replacing one’s home is an expensive proposition; having the right homeowner’s insurance can make the process less difficult. Renters insurance offers peace of mind for renters in the event their personal property is damaged due to a covered loss.
Long-term disability insurance
The prospect of long-term disability (LTD) is so frightening that some people choose to ignore it. While everyone thinks that “nothing will happen to me,” relying on hope to protect one’s future earning power is not a good idea. Instead, choose a disability policy that provides enough coverage to enable you to enjoy your current lifestyle even if you can no longer continue working.
Long-term disability provides a monetary benefit equal to a portion of the insured’s salary for covered disabilities. It typically begins when short-term disability ends. To receive benefits, the disability must have occurred after the policy’s issuance and then, typically after a waiting period. Medical information, often confirmed by a physician, must be provided to the insurer for consideration.
Most long-term disability insurance policies categorise disabilities as own occupation or any occupation.
Again, Smith explained that own occupation means the insured, due to disability, is unable to perform their regular job or a similar job. Any occupation means the insured, due to disability, is unable to perform any job for which they are qualified.
Similar to short and long-term disability insurance, workers’ compensation or workers comp, it pays a monetary benefit to workers who become injured or disabled at work or while performing their jobs. Many countries require employers to carry workers’ compensation insurance for their employees. In exchange, employees may not sue their employer for negligence.
“While long-term disability insurance and workers’ compensation insurance both pay for disabilities, long-term disability insurance is not limited to disabilities or injuries occurring at work or while working,” Smith explained further.
Life insurance
Smith and Estevez while espousing on life insurance, stated that “Life insurance protects the people that are financially dependent on you. If your parents, spouse, children, or other loved ones would face financial hardship if you died, life insurance should be high on your list of required insurance policies.
“Think about how much you earn each year (and the number of years you plan to remain employed) and purchase a policy to replace that income in the event of your untimely demise. Factor in the cost of burial too, as the unexpected cost is a burden for many families.”
Life is full of surprises and the unexpected do happen unannounced. To avoid singing had I known, the logical thing to do is to purchase life insurance no matter the situation one finds oneself.
A whole life insurance policy is a permanent life insurance policy in which death benefits are paid upon the death of an insured. The whole life policy remains in force for the life of the insured as long as premiums are up-to-date. In addition to death benefits, whole life policies build cash value, which can be accessed during the insured’s lifetime.
On the other hand, experts say a universal life (UL) insurance policy is permanent life insurance that allows the policyholder to invest their cash value in a separate account, which features funds tied to the stock market. It is a flexible policy, whereby premiums and death benefits can be adjusted.0
Health insurance
Adjunct to life insurance is health insurance, an aspect of living that one cannot know what would happen in the next second. This makes it a necessity. As stated earlier, the soaring cost of medical care is reason enough to make health insurance very important. Even a simple visit to the family doctor can result in a hefty bill. More serious injuries that result in a hospital stay can generate a bill that tops the price of a one-week stay at a luxury resort. Injuries that require surgery can quickly rack up five-figure costs. Although the cost of health insurance is a financial burden for just about everyone, the potential cost of not having coverage is much higher. Therefore, it becomes a very important requirement in one’s lifetime.
Health insurance helps cover routine and emergency medical care costs, often with the option to add vision and dental services separately. “In addition to an annual deductible, you may also pay copays and coinsurance, which are your fixed payments or percentage of a covered medical benefit after meeting the deductible. However, many preventive services may be covered for free before these are met.”
Health insurance may be purchased from an insurance company, an insurance agent, the federal health insurance marketplace, provided by an employer, or federal medicare and medicaid coverage.
Homeowner’s insurance
Home replacement is an expensive proposition, as such, having the right homeowner’s insurance can make the process less difficult. When shopping for a policy, look for one that covers the replacement of the structure and the contents, in addition to the cost of living somewhere else while your home is repaired.
Homeowner’s insurance, also known as home insurance, protects the home, other property structures and personal possessions against natural disasters, unexpected damage, theft and vandalism.
Homeowner insurance won’t cover floods or earthquakes, which you will have to protect against separately.
“Some lenders or landlords will likely require you to have homeowner’s insurance coverage. Where homes are concerned, you don’t have coverage or stop paying your insurance bill, your mortgage lender is allowed to buy homeowners insurance for you and charge you for it,” Smith said.
It should be noted and kept in mind that the cost of rebuilding does not need to include the cost of the land since you already own it. Depending on the age of your home and the amenities it contains, the cost to replace it could be more or less than the price you paid for it. Experts advise that to get an accurate estimate, one should find out what local builders charge per square foot and multiply that number by the amount of space he/she will need to replace without forgetting to factor in the cost of upgrades and special features. Also, be sure the policy covers the cost of any liability for injuries that might occur on the property.
Renter’s insurance
Renter’s insurance is another type of homeowner’s insurance. It is not only homeowners that need to take insurance policy. Others like renters do need it too because renters also need peace of mind that they will be made whole in the event of a loss. Fortunately, renter’s insurance is a type of property insurance available to people who rent or lease properties. This insurance provides coverage for personal belongings, liability and additional living expenses for covered losses.
Smith said for one property, there may be two types of property coverage: homeowner’s insurance and renter’s insurance. However, homeowner’s insurance does not cover the personal property of the tenant. Therefore, it is important for lessees to obtain renter’s insurance to protect their assets. Although renter’s insurance differs from homeowner’s insurance, they have the same components: coverage for the dwelling, other structures, personal property, additional living expenses (also known as loss of use), liability and for medical payments.
Renters are not responsible for insuring the dwelling or other structures, as such coverage are often set to zero.
Some coverage takes up the personal property of the renter, others provide additional benefits for living expenses in the event of a loss. For example, if the renter is displaced from the home due to a fire, a coverage can provide cover for the cost of living elsewhere, such as a hotel and food expenses, while another can provide coverage for injuries and property damage caused by the insured and covers medical expenses for guests of the renter on the property with permission.
“Dogs are man’s best friend, but some breeds, like Pit Bulls and Rottweilers, can prevent you from obtaining coverage,” Smith pointed out.
Vehicle insurance
To underscore the importance of this insurance, the National Insurance Commission (NAICOM) groups it under the category of compulsory insurance. Some level of automobile insurance is required by law in most places. Even if you are not required to have it and you are driving an old clunker that has been paid off for years, automobile insurance is something one should not skip. If you are involved in an accident and someone is injured or their property is damaged, you may be subject to a lawsuit that could cost you everything you own. Accidents happen quickly and the results are often tragic. Having no automobile insurance or purchasing only the minimum required coverage saves you only a tiny amount of money and puts everything else you own at risk.
In addition to the policies listed above, Smith stated that business owners need business insurance. Liability coverage in a litigation-happy society could be the difference between a long, prosperous endeavor and a trip to the bankruptcy court.
Jessica Olah, while writing on insurance policies one should have, cautioned that to achieve this, it is important to shop for insurance carefully.
According to her, insurance policies come in a variety of shapes and sizes and boast many different features, benefits and prices. “Shop carefully, read the policies and talk to a licensed insurance professional to be certain you understand the coverage and the cost. Make sure the policies you purchase are adequate for your needs and don’t sign on the dotted line until you are happy with the purchase.
“Consider enlisting the service of an insurance broker as they can search for policies across several insurance companies to find coverage that best suits your needs. Ask the broker to provide you with several options so you can compare features, provisions and rates. Be in control of your protection by being well-informed to make a decision,” Olah advised.
A policyholder must cancel an insurance policy according to the cancellation provisions of their contract. Often, insurers allow policyholders to cancel by phone, however, some require the request in writing.
There are many types of insurance policies, some are not very common. The right type of insurance for you will depend on your goals and financial situation.
For instance, there is an umbrella policy, which is liability insurance that provides additional coverage in excess of the policyholder’s current policy limits. For example, if damages exceed the limits of a policyholder’s property insurance (e.g., home or auto), the umbrella policy will provide additional liability coverage, up to policy limits. This type of insurance most benefits those with sizeable assets, which could be subject to seizure.
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