How Much Insurance Do I Need?
There is no perfect way to figure out how much insurance you need, but there are some common-sense guidelines that can help. First, keep in mind that insurance companies are in the business of making money – and one way they do this is to sell you more coverage than you need. For example, if your house costs $250,000 to rebuild and you have $300,000 worth of coverage on it, your insurance company makes more money if your house burns down (assuming they don’t also lose another claim payout when a neighboring house burns down). One helpful rule of thumb is that the amount of life insurance should be 10 times the size of your annual income. Another rule is to make sure your home’s value falls within its policy’s boundaries – remember that most policies will not cover damages caused by floods or earthquakes unless these natural disasters are specifically written into the policy. It might not be as sexy as buying a new sports car or going on a luxury vacation, but make sure that you give critical thought towards purchasing adequate insurance for all large purchases in life.
The Main Things Your Insurance Company Will Try To Do
Once you make a claim, your insurance company can:
- Raise your rates.
- Drop your coverage.
- Cancel your policy (though this is less common).
- Offer you a discount if you agree to take responsibility for the crash and pay for some or all of the damages out of pocket (especially if the crash was minor).
How To Get The Most Value For Your Money
- The best policy is the one that gives you the most coverage for the lowest premium.
- The best policy is a compromise between your needs and your budget.
- The best policy is a balance between what is affordable now, and what will protect you in the future when life throws you a curveball.
- The best policy is one you are comfortable with because it meets all your needs and does not break your budget.
- You need to work with an insurance agent to get the right mix of value for money, as well as maximum coverage at minimum cost.
What You Shouldn’t Do
Sure, you should avoid buying a policy that covers too little, but don’t over-do it either. In the same way that you don’t want to have to pay for something out of pocket which is covered by your insurance, you also don’t want to get stuck paying for something that your insurance doesn’t cover. That’s why it’s important to find coverage that suits your specific family’s needs and budget. A one-size-fits-all solution might cover more than what you need and cost more than what you can afford.
Keeping in mind the risk factors mentioned above, consider the following:
If adhering to even one of those guidelines would cause serious financial hardship, critical illness insurance may not be right for you. If they all sound doable—or even easy—a critical illness policy can provide peace of mind in knowing that there are funds available if or when a serious health event occurs.
Start with the basic insurance policies and then get an additional policy for when you need to have many things at once.
The first step when considering critical illness insurance is to ensure you have the basic policies in place, such as life insurance and disability insurance. After that, if you’re concerned about needing a lot of healthcare at once, then critical illness can be a good addition.
It’s easy to go overboard with insurance and purchase coverage for things you don’t need or can’t afford. To control your costs, consider looking for an affordable policy with a shorter waiting period and few exclusions. That way, if you do get sick enough, the money will be there when you need it most.