Most people have many competing priorities for their money — food, shelter, transportation, clothing, and discretionary spending just to name a few. But in addition to meeting your basic needs, it's a good idea to save some of your money for the future. In addition to an emergency fund, retirement, a college fund, and paying down debt, you'll also want to consider various kinds of insurance. This will make sure that you're protected against events that would have a catastrophic impact on your life if they happened.
Different Types of Insurance
While there are many different kinds of insurance available, almost all kinds of insurance coverage works in a similar way. Insurance usually offers protection against specific events happening. You pay a relatively small monthly premium to protect against the chance that this event happens — if it does, the insurance company will pay some or all of the expense.
Here are a few examples of different types of insurance:
Car insurance — covers you in case you’re in an accident and damage your car or others' property
Health insurance — can cover both routine medical care and medical emergencies
Life insurance — provides a death benefit to your beneficiaries if you pass away during the term of the insurance policy
Disability insurance — if you’re no longer able to earn your salary due to illness or injury, disability insurance can replace some of those earnings
Home insurance — if your home is damaged, your home insurance will pay to have it repaired or replaced
Renter's insurance — covers your belongings if the home you rent is damaged
Disability insurance can go hand in hand with life insurance as a way to make sure that your loved ones are protected if you suffer a catastrophic life event. If you have a spouse, children, or other dependents that rely on your income, you need to protect them in case you are no longer able to provide for them through either death or disability.
The risk/reward tradeoff for certain types of insurance
Every different type of insurance has a different risk/reward tradeoff. As you can see from the different kinds of insurance mentioned above, each provides a certain benefit based on various events occurring. The key is to think through the risks of each type of event and how the worst-case scenario would impact your overall finances. If you have a spouse, partner, or other dependents that rely on your income, you owe it to them to make sure they will be financially secure in case something happens to you.
Yes, at first it may seem like a "waste of money" to pay for life insurance knowing that you’re unlikely to actually die during the length of the policy. But the statistics for life and disability insurance show otherwise — one out of every four workers will be unable to work at some point in their working career. Most people find that the peace of mind in knowing that you are covered against catastrophic events like death or disability is worth the monthly premium.
The Best Time to Buy Insurance
Some types of insurance are mandatory for most people. For example, most states have laws requiring some sort of car insurance if you own an automobile. And depending on your mortgage or lease, you may be required to have home or renter's insurance. But other types of insurance are optional, which means that you have to decide if you're going to get them, and if so, when and for how much.
While you may think of life insurance or disability insurance is something that is better suited for middle-aged or older adults, there are many good reasons to buy insurance when you're young. The first reason is that the younger (and healthier) you are, the lower your monthly premium amount will be when you’re older. That can make the premiums for life and/or disability insurance quite reasonable.
If that's not enough of a reason, here are some statistics that might help you realize the benefits of disability insurance:
You may be more likely to suffer a disability than you think — the Social Security Administration estimates that someone born in 2001 has a 25 percent chance of becoming disabled between age 20 and normal retirement age.
Nearly half of foreclosures on conventional mortgages are caused by the disability of one of the homeowners.
Around one-quarter of people who file for bankruptcy report having some kind of disability.
90% of disabilities occur due to illness as opposed to injury.
Spending Now to Save Later
Disability insurance is an important part of protecting your lifestyle. One good way to think about disability insurance or life insurance is an investment just like a 401(k), IRA, or other retirement accounts. Even though any one person is statistically unlikely to die or be disabled, that doesn't mean that you shouldn't invest in securing your future.
On the contrary, securing your future through insurance policies can be one of the shrewdest financial moves you make. You spend a little now to protect yourself against a potential financial catastrophe later. When you take out an insurance policy when you're young and healthy, your monthly premiums can be surprisingly little money for the peace of mind and security that they provide.
Five Reasons to Get Income Insurance Now
Here are five reasons to consider a disability insurance policy:
If you have dependents that rely on your income, you have an obligation to make sure they are protected if something happens to you.
You can sign up for Asteya's permanent disability insurance online and get a quote in seconds.
Your employer may offer some form of disability insurance as part of your overall benefits package, though you'll want to make sure the amount would be sufficient if you needed it.
Social Security disability benefits can be very difficult to qualify for. And then, even if you are approved, Social Security on its own will likely not be enough to continue your existing lifestyle.
Disability insurance can give you peace of mind knowing that you’re covered in case of a catastrophic illness or injury that leaves you unable to work and earn an income.
The Bottom Line
Spending a little bit now to protect against possible huge expenses later is generally a wise financial move. If you have others who depend on the income you earn, it really is a no-brainer to purchase an appropriate amount of life and disability insurance to make sure that they remain protected in the case of an unexpected death, illness, or severe injury. Asteya makes it easy to get A-rated coverage for as low as $6/month.