By Diane Ferraro
Deciding what types of insurance you need can be both confusing and frustrating. The types of insurance that you need depend greatly upon your life situation. Are you married? Do you own a home? Do you have children? Are you your family’s primary breadwinner? Two major types of insurance that are worth taking your time to consider are life insurance and income insurance.
Life InsuranceLife insurance is meant to protect those who are dependent upon your salary. It will give your family a way to replace your income. It is also a way to ensure that your family can pay for any legal, medical, or funeral costs. If you are not sure if you and your family need life insurance, simply imagine what will happen if there is an accident or something horrible happens. Obviously, this can be a very difficult thing to think about, but it will help you to determine what you need to do in order to protect your family.
- What financial impact will your death have on your family?
- Will your family be able to cover the cost of your funeral?
- Do your spouse and/or children depend on your salary?
- Does your salary pay for basic needs in your household?
Even if you do not work or your salary isn’t your family’s primary income, your family still may benefit from life insurance. If you stay at home and take care of your children and household tasks, how would your spouse take care of all of these responsibilities on his or her own? What would it cost for your spouse to hire a nanny? A stay-at-home parent has many duties, jobs and responsibilities. No amount of money will be able to replace you but life insurance will greatly lessen the financial burden on your spouse.
So, a good rule of thumb is that if your family depends on you financially or if you are responsible for the majority of the household duties, including childcare, you should seriously consider life insurance.
A second, major type of insurance to consider is income insurance (also known as income replacement insurance or permanent health insurance). It is true that life insurance will protect your family financially if you die, but what if you are injured or seriously ill? Income insurance will protect the salary that you receive should you become seriously ill or injured and not be able to work. The insurance company will pay you and your family your monthly salary for a predetermined amount of time. This could be months or years, depending on the terms of your policy. When discussing income insurance with your agent, discuss the length of the policy and how it will affect your premium.
The biggest reason to get income insurance is to protect your investments, the biggest of these usually being your home. Income insurance will give you the ability to make the mortgage payments even if you are too sick or hurt to work. You will be able to continue to make the monthly mortgage payments even if you are not receiving your salary. This is a great way to protect your home and your family if you become ill or hurt.
You may be wondering if you can afford income insurance. The amount of your monthly or yearly premium that you will pay to the insurance company will depend upon your situation. Factors that affect the amount of your premium include:
- Type of work
- Medical history
- Current income
Your premium will be higher if you are older, your work is dangerous, you have a history of illness or if you have a substantial income. Income insurance is also a smart idea for those who are self-employed. Many companies offer some type of disability insurance. However, if you own your own business, you will not have this option.
Life insurance and income insurance are two major forms of insurance that can help you to protect yourself, your family and your home. Take time to consider all of your options and all of the factors that will affect your premiums.
Diane Ferraro is an expert in all things insurance, especially life cover. When she is not blogging or writing she loves to spend time with her twin daughters.