Insurance is a contract between an individual and an insurance company where the insurer promises to pay for losses and expenses incurred by the insured in return for a premium paid. There are several main types of insurance that individuals and families may want to consider obtaining.
The most common types of Best Choice Insurance include:
Health insurance – Helps pay for medical expenses incurred from illness, injury, hospitalization, prescriptions, and more. Can include vision and dental.
Life insurance – Provides income replacement and funeral expenses for dependents if the policyholder passes away. Term life insurance covers a set period while whole life insurance covers your entire life.
Homeowners/renters insurance – Covers damage to personal possessions and dwelling from events like theft, fire, flooding, smoke, vandalism, and more. Can help pay for repairs or replacement.
Auto insurance – Required by law, it covers collision damage, liability from causing accidents that harm others, and more. Helps pay for repairs or medical bills.
Disability insurance – Replaces income if you become injured or sick and unable to work. Protects your finances.
When choosing insurance, key factors to consider include:
Coverage needs – Assess risks and identify types of losses you want to be protected against. This guides the plans you should get.
Cost – Compare premiums across insurers. Consider higher deductibles to reduce premiums.
Financial stability of insurer – Select established insurers that are financially sound. Check rating agencies.
Customer service – Find insurers with high marks on responsiveness, ease of filing claims, and satisfaction.
Coverage exclusions and limitations – Understand what circumstances would not be covered by a policy.
Getting the right insurance helps individuals and families better handle unexpected losses and expenses throughout life. Evaluating needs and insurer options is important to make the best choice.
Health Insurance
Health insurance helps pay for medical expenses that arise from illness, injury, or disease. There are several types of health insurance plans to consider:
Types of Plans
Major Medical: This plan has a high deductible but will cover most services after you meet your deductible. It provides protection against catastrophic costs.
PPO: A preferred provider organization allows you to see doctors both in and out of network, but you will pay less when using in-network providers. PPOs offer flexibility to see specialists without a referral.
HMO: A health maintenance organization only covers care from in-network providers. You must choose a primary care doctor to coordinate your care and referrals are required for specialists. HMOs have lower premiums but less flexibility.
POS: A point of service plan is a hybrid between a PPO and HMO, allowing in-network and out-of-network care. You pay less when using in-network doctors. Referrals are required for specialists.
Benefits
Health insurance covers doctor visits, hospitalization, prescriptions, preventive care, maternity care, mental health services, and more. Plans differ in deductibles, copays, coinsurance rates, and services covered. Those with chronic conditions or anticipating major medical expenses may opt for lower deductibles and more coverage.
Costs
Premiums, deductibles, copays, and coinsurance all factor into the cost of health insurance. Those in good health can find affordable basic coverage, while comprehensive plans with lower out-of-pocket costs will have higher premiums. Employer-provided plans may cover some of the premium expenses.
Factors to Consider
When choosing a health insurance plan, consider your expected healthcare needs and budget, preferred doctors and hospitals, prescription drug needs, and desire for in-network vs out-of-network flexibility. Compare premiums, deductibles, copays, and total out-of-pocket maximums.
Pros and Cons
The pros of health insurance are protection from large medical bills, lower negotiated rates, and preventive care coverage. The cons are the monthly premium costs, deductibles that must be met before coverage kicks in, and restrictions around which doctors and hospitals you can use.
Life Insurance
Life insurance provides financial protection for your family in the event of your death. There are several types of life insurance policies to choose from:
Term Life Insurance
Term life insurance provides coverage for a set period of time, such as 10, 20, or 30 years. This is the most affordable type of life insurance and makes sense if you need coverage for a specific need like paying off a mortgage or getting your kids through college. Premiums are lower because term policies only pay out if you die during the term.
Whole Life Insurance
Whole life insurance provides lifetime coverage as long as you pay the premiums. It has an investment component that builds cash value over time that you can borrow against or withdraw during your lifetime. Premiums are more expensive because it guarantees coverage for life.
Universal Life Insurance
Universal life insurance is a hybrid of term and whole life insurance. It provides permanent coverage with premiums that are flexible. Part of the premiums go towards the death benefit coverage and part go towards building cash value that you can access while still living.
How Much Coverage to Get
As a general rule, get a policy that provides 10-15 times your annual income in coverage. The amount you need depends on factors like your age, marital status, number of dependents, debts, and goals. Work with an insurance agent or financial advisor to determine the right amount for your situation.
The cost of life insurance varies greatly based on the type of policy, your age, medical history, and other factors. Term life is quite affordable, often $30-$50 per month for a healthy 30 year old. Permanent insurance is more expensive, with premiums in the hundreds per month. Get quotes from multiple insurers to find the best rate.
Life insurance provides important financial security for families. Determine the right type and amount of coverage you need, shop around for competitive pricing, and rest assured knowing your loved ones will be taken care of.
Homeowners/Renters Insurance
Homeowners insurance covers the structure of your home as well as your possessions inside the home against damage from various perils like fire, windstorm, hail, lightning, and more. Renters insurance provides similar coverage for your belongings inside a rented apartment or home.
The typical homeowners policy has two main parts – dwelling coverage and personal property coverage:
Dwelling coverage insures the physical structure of the home. It covers damage to the walls, roof, foundation, and other structural parts of the home.
Personal property coverage insures the contents inside the home like furniture, electronics, clothing, appliances, and more. It covers these items if they are damaged or stolen.
Some additional coverages that can be added to a homeowners policy include:
Liability coverage to protect against lawsuits for bodily injury or property damage that happens at the insured location.
Loss of use coverage that pays additional living expenses if you can’t live in your home due to a covered loss.
The cost of homeowners insurance can vary greatly based on factors like:
Location of the home – Areas prone to natural disasters like hurricanes, tornadoes, wildfires, or earthquakes tend to have higher premiums.
Age and construction of home – Newer homes with updated electrical, plumbing and roofing systems often qualify for lower rates.
Amount of coverage – Higher dwelling and personal property coverage limits increase premiums.
Deductible amount – Choosing a higher deductible lowers the premium.
Discounts – Companies offer discounts for things like installing alarms, being claim-free, bundling policies, and more.
Regularly reviewing your policy with an agent and updating coverage as your home value changes can help ensure you have the right homeowners or renters insurance protection.
Auto Insurance
Auto insurance is required in most states and provides financial protection in the event of an accident or damage to your vehicle. Understanding the different types of auto insurance coverage is key to choosing the right policy.
Required Minimum Coverage
Liability insurance is the minimum coverage required by law in most states. It covers bodily injury and property damage that you cause to others if you are at fault in an accident. There are two components:
- Bodily Injury Liability – covers medical expenses of other people injured in an accident you cause
- Property Damage Liability – covers repairs to other vehicles and property damaged in an accident you cause
The minimum liability limits vary by state, but commonly require:
- $25,000 bodily injury per person
- $50,000 bodily injury per accident
- $25,000 property damage
Higher liability limits are recommended to better protect your assets in the event of a major accident.
Additional Options
Other common auto insurance coverages include:
- Collision – covers damage to your vehicle from a collision, regardless of fault
- Comprehensive – covers non-collision damage including theft, vandalism, fire, flood, hail, animal strikes
- Uninsured/Underinsured Motorist – covers injuries to you and your passengers if the at-fault driver has inadequate or no insurance
- Personal Injury Protection – covers medical expenses for you and your passengers, regardless of fault
- Rental Reimbursement – pays for a rental car if your vehicle is being repaired after a covered loss
Ways to Save
There are several ways to get the best rate on your auto insurance policy:
- Shop around and compare quotes from multiple insurers
- Ask about discounts – multi-policy, good driver, low mileage, anti-theft devices
- Raise your deductible to lower your premium
- Drop optional coverages you may not need
- Maintain good credit and driving history
- Insure all vehicles with the same company
Choosing the right auto insurance ensures you have adequate coverage at an affordable price. Understanding the various options allows you to customize your policy to suit your needs and budget.
Disability Insurance
Disability insurance provides income replacement if you become injured or sick and are unable to work. There are two main types of disability insurance policies:
Short-Term Disability Insurance
Short-term disability insurance replaces a portion of your income, usually around 60%, if you are unable to work for a short period of time, typically 3-6 months. It helps pay for basic living expenses like rent, groceries, and bills while you recover.
Short-term disability policies have a waiting period before benefits kick in, often 7-14 days. Premiums are usually inexpensive, costing $15-50 per month depending on factors like your age, income, and policy details. Many employers provide short-term disability coverage as part of benefits.
Long-Term Disability Insurance
Long-term disability insurance provides income replacement if you are unable to work for an extended time. Policies replace around 60% of income. Benefits start after a waiting period, typically 90 days, and can continue until retirement age.
Long-term disability policies have higher premiums than short-term, often 1-3% of your annual income. Premiums depend on factors like age, income, occupation risk, and length of benefit period. Some employers provide coverage, but individual policies are recommended to supplement.
The key benefits of disability insurance are:
- Replaces income to cover living expenses
- Prevents falling into debt or tapping savings
- Provides coverage not offered by workers’ comp or Social Security
- Gives peace of mind knowing you can maintain your lifestyle if sick/injured
Long-term Care Insurance
Long-term care insurance helps cover the costs of long-term services and supports for people who need assistance with daily living activities due to a prolonged physical illness, disability, or cognitive impairment. This type of insurance can provide financial relief if you develop a condition that requires long-term care.
What Long-term Care Insurance Covers
Long-term care insurance typically covers:
- Care in a nursing home, assisted living facility, or your own home
- Home health aides, homemaker services, adult day care
- Hospice and respite care
- Alzheimer’s facilities
- Prescription drugs, medical equipment, supplies
It reimburses policyholders a daily amount (e.g. $100-500/day) for long-term care services up to a predetermined limit. Policies can cover care for a certain period of time (e.g. 2-5 years) or a lifetime maximum dollar amount (e.g. $100,000-$500,000).
Costs of Long-term Care Insurance
Premiums are based on your age at purchase, benefit amount, benefit period, and other policy features. Expect to pay $1,000-$4,000 per year depending on your age. The younger you are when you purchase a policy, the lower your premiums.
Who Needs Long-term Care Insurance
Long-term care insurance may make sense if you have significant assets you want to protect, don’t want to rely on family for care, or want to choose your own care providers. It can help preserve your nest egg and allow your spouse to avoid being your caregiver.
People who should consider long-term care insurance include those with health conditions, family history of needing care, limited family support, or substantial assets. However, it may be unnecessary if you have very limited assets or family willing to provide care. Consult a financial advisor to see if it aligns with your overall financial plan.
Umbrella Insurance
Umbrella insurance provides extra liability coverage beyond what your other insurance policies provide. It kicks in when you reach the liability limits of your other policies like auto, homeowners, and watercraft insurance.
Umbrella policies provide an additional layer of protection in case you are sued for injuries or damage you cause to other people or their property. For example, if you cause an accident that exceeds your auto liability limits, umbrella coverage helps pay for legal fees and settlements.
Umbrella insurance typically provides $1 million to $5 million in additional liability coverage, but policies worth $10 million or more are available. The cost is relatively low – usually $150 to $300 per year for $1 million in coverage. The price is based on your limits and risk factors like claims history and number of homes and vehicles.
The key benefits of umbrella insurance include:
Extra liability protection beyond your other policies
Coverage for legal costs related to a lawsuit
Protection for assets like your home and savings
Peace of mind knowing you have additional coverage
Umbrella insurance is worth considering if you have significant assets to protect or you engage in activities with high liability risks. It provides an extra layer of coverage at a reasonable price. Just make sure your other insurance policies meet the minimum required limits before adding an umbrella policy on top.
Choosing a Provider
When selecting an insurance provider, there are several key factors to consider:
Reputation and Financial Strength
Look for established companies with strong financial ratings from agencies like A.M. Best. Avoid startups or companies with a history of denying claims. A reputable provider will have the resources to pay out claims.
Range of Coverage Options
Choose a provider that offers a wide variety of policies. This allows you to customize coverage and select add-ons or special features like accident forgiveness for auto insurance.
Customer Service and Claims Handling
Pay attention to customer satisfaction scores and complaints. You want an insurer that responds quickly and treats customers fairly during the claims process. Ask about response time, ease of filing claims, and customer support options.
Cost
Compare premium rates from multiple insurers. Consider the level of coverage alongside the price. Cheaper plans sometimes offer less protection. Look for discounts and ways to bundle policies to save money.
Local Agent Availability
Many people prefer having a local insurance agent to contact for support. See if the insurer allows you to choose a local agent or if you must go through the company directly.
Technology Capabilities
See what online account management, billing, and claims tools are available. Advanced insurers have robust mobile apps and portals for managing your policy.
By evaluating these key factors, you can find a trustworthy insurance company that offers the right mix of coverage, service, technology, and affordability to meet your needs.
Conclusion
Choosing the right insurance for your needs involves carefully considering several key factors. The most important is assessing your current situation and potential risks. Consider your health, age, lifestyle, family status, homeownership, and assets. This helps determine what types of insurance are necessary or recommended.
Next, research different companies and policies. Look at premium costs, coverage details, exclusions, deductibles, and customer service ratings. Pay close attention to what each policy does and does not cover to avoid surprises later. Shop around for quotes, as pricing can vary significantly between providers.
Also weigh the financial stability and reputation of insurers. Established companies with strong financial ratings typically offer greater security and reliability. Newer insurers may have lower premiums but less of a track record.
Think about convenience factors as well. Choosing a local agent may provide personalized guidance and support. Going with a national insurer often means you can manage policies online or via an app. Consider which option best suits your needs.
Lastly, review policies annually or when life circumstances change to ensure you have adequate, up-to-date coverage. Adjust plans over time as needs evolve. With research and planning, you can secure insurance that provides both peace of mind and value.