When you get right down to it, every type of insurance is optional. For thousands of years, people survived just fine without any type of insurance at all. Who needs an insurance policy when the family homestead can be replaced by chopping down a few trees from the backyard?
Living an uninsured lifestyle is no longer a smart idea.
No amount of tree-trimming can replace a stolen laptop, a crashed-up car, or the income stream provided by the family breadwinner. Without an insurance policy to replace these critical items, many families would be financially devastated within seconds if disaster were to strike.
Some people think their tight budget can’t be stretched far enough to fit in a good insurance policy. The ironic part of this idea is that people on a tight budget are the ones who can’t afford to NOT have coverage. Think about it this way; rich people can afford to replace almost anything without a second thought, but the rest of us aren’t so lucky.
Most of the time, the same people who think they can’t afford insurance coverage don’t even check current rates. If you fall into that category, you might be surprised at how affordable an excellent policy can be. Take a look at these optional insurance plans and their average monthly rates before you write them off your list of possibilities:
1. Auto Insurance
Average Monthly Cost – $75 for basic liability coverage
Who Needs It the Most – Anyone who owns a motor vehicle
Who Needs It the Least – Non-car owners
If you don’t want to lose your license or pay a hefty fine, you have to maintain at least the minimum coverage that the law requires in your state. However, this isn’t nearly enough for most drivers. Think about it this way – what good will a $20,000 policy do when you total someone else’s new $50,000 ride? While it will pay the first $20,000, you may still be on the hook for a cool $30,000.
In addition to upping the limits to cover more expensive vehicles, you should also adequately cover your own (if it’s fairly new) and increase your bodily injury coverage. Did you know that many auto policies only cover $25,000 in medical damages for each injured person with a $50,000 cap for everyone hurt in the accident? Depending on the hospital, that might only be a single day in the emergency room. You’ll owe the rest personally, and this is the way that most people end up in court.
When most drivers check with their insurance carrier, they’re amazed at how affordable it is to upgrade their policy to the maximum coverage limits and eliminate most of the risk of personal liability. Just remember, auto insurance is only optional if you don’t own a car.
2. Flood Insurance
Average Monthly Cost – $30 for $200,000 of property damage and $80,000 of content-replacement coverage in low-risk areas, $227 for $250,000 of property damage and $100,000 of content-replacement coverage in high-risk areas
Who Needs It the Most – Homeowners in flood-prone areas
Who Needs It the Least – Because standard homeowner’s insurance only covers falling water and not rising water, everyone really needs this important coverage.
It’s heartbreaking to watch the Weather Channel cover storm-ravaged areas and see the rising waters wash away everything these families own. Of course, our sympathies kind of die a quick death when they tell the reporter they’ll just build again on the same spot – for the umpteenth time. Nevertheless, if these people have flood insurance, they’ll be compensated for every single thing they lost up to the limits of the policy.
Almost every flood insurance policy written in the United States is offered by the National Flood Insurance Program, or NFIP. Check with this government agency before the waters start to rise if you’re in a high-risk area.
3. Renters Insurance
Average Monthly Cost – $10 a month for $25,000 worth of personal property coverage and $100,000 of liability coverage.
Who Needs It the Most – Anyone who rents a home or an apartment
Who Needs It the Least – Homeowners who have a standard homeowner’s policy
Many renters think that the landlord’s insurance policy will cover their damages in the case of a fire, flood, or any other disaster. This couldn’t be more wrong. Even if the pipes burst or another tenant floods your apartment, you won’t recover a thing without renter’s insurance. On the other hand, this inexpensive insurance coverage will pay for your belongings if they’ve been destroyed or stolen and even protect your interests if someone is hurt on the rental property and tries to blame you.
4. Health Insurance
Average Monthly Cost – $400 for an individual, $1,100 for a family
Who Needs It the Most – Families with children, individuals with a chronic health condition, and the elderly.
Who Needs It the Least – Young, healthy adults often make do with no health insurance, but everyone should have coverage.
Although health insurance is the most expensive insurance policy there is, it’s also the one that provides the most benefits to the widest range of people. Depending on the policy, heath insurance usually covers doctor’s visits, lab tests, prescription drugs, and hospital stays.
While it’s true that no hospital or doctor can refuse to treat you for a life-threatening condition, you might find that many turn you away when you’re not beating on death’s door without that important little insurance card. Even with these steep rates, a single hospitalization will make this policy more than pay for itself.
5. Life Insurance
Average Monthly Cost – $30 for a 30-year-old purchasing a $1,000,000 policy.
Who Needs It the Most – Families with a lot of debt, dependent or college-aged children, and/or a non-working spouse.
Who Needs It the Least – Older couples with little or no debt and no dependents
Prices vary based on:
• Type of policy
• Coverage amount,
• Health condition
• Smoking status
Life insurance policies sound so complicated that most people don’t even want to think about the different options. Add in the fact that you’re basically betting on whether or not you’ll die an early death, and that cuts out another big segment of the population.
Although it looks like there are a lot of flavors when it comes to life insurance, they can all be broken into two major types. Whole life policies generally cost more each month, but they build value, and the payments eventually disappear. Term policies, on the other hand, are much more affordable, but coverage (and your investment) disappears as soon as you stop making the payments or reach the end of the term.
6. Umbrella Insurance
Average Monthly Cost – $25 for a $1,000,000 policy
Who Needs It the Most – Individuals with valuable assets or anyone who never wants to worry about a lawsuit.
Who Needs It the Least – Families living paycheck to paycheck with no tangible assets.
Did you know that you can purchase an insurance policy that kicks in whenever you exceed the limits of your auto or homeowners policies? An umbrella policy does just that. In most cases, you must also purchase maximum-coverage policies for your home and auto.
However, this inexpensive coverage could mean the difference between keeping and losing your home or retirement fund if you’re found liable for massive amounts of damages. The only restriction is that this type of policy won’t pay for anything you do that’s illegal or causes purposeful harm to others. For most people, this isn’t a concern.
While this list reviews the most common types of insurance coverage, you can insure just about anything if you really want to. Other run-of-the-mill policies include travel insurance, burial policies, cancer insurance, and laptop insurance. Of course, if you really want to make sure you’re completely protected, the famous Lloyds of London will even insure your body parts as they did for these celebrities:
• 20th Century Fox insured Betty Grable’s legs for $1,000,000 in the 1940s.
• The Cheerio Yo-Yo Company insured 13-year-old yo-yo champion Harvey Lowe’s hands for $150,000 in the 1930s.
• Bruce Springsteen insured his own voice for $6,000,000.
• Michael Flatley, the Riverdance king, insured his own legs for an amazing $47,000,000.
• The oddest Lloyds of London policy might have been written for the iconic comedy team of Abbot and Costello against a major fight. This duo insured their comedy act with a $250,000 policy in the event they argued their way out of a career.
Most of us don’t have the need (or the ego) to insure ourselves (and forget about a single body part) for millions of dollars, but maintaining a reasonable amount of coverage in the event of the unexpected can be a financial lifesaver.