There are various insurance types for individuals, and choosing the right one for you can be overwhelming. These policies are distinct, yet they often overlap.
It’s wise to review your personal insurance policies any time you have a significant life event. If you find yourself unable to work, this will ensure that you and your loved ones are cared for.
Read on for a brief description of the different types of individual insurance.
Life Insurance
This is the primary way to protect your family and dependents from financial hardship when you pass away. It is an agreement between you and an insurer, where you pay the insurance premiums, and in exchange, they pay your estate a certain amount upon your death. The amount paid is called a death benefit.
However, if you have named a beneficiary, the money will go to that person rather than your estate. The amount your beneficiaries receive can be used for anything, from everyday bills to funeral costs or even putting a child through university.
There are a few types of Life Insurance policies, so you’ll need to do some research to determine which one makes the most sense for you.
It works to your advantage to get a Life Insurance policy early. Your health and age will be evaluated to determine your eligible coverage and how much it will cost.
Life insurance does have its limitations; however, for example, suicide within two years of purchasing the insurance is not covered. Also, death by extreme sports is often not covered.
Income Protection
Also known as Disability Insurance, Income Protection is a long-term policy designed to protect your income if you cannot work. It will cover you until you can either return to work or retire.
Income Protection Insurance typically covers 50%-65% of your regular income. It is a safety net to pay your bills and mortgage when you can’t work. It would cover instances of illness or injury, short and long-term. The payments are ongoing and regular.
Income Protection Insurance can be claimed as many times as necessary as long as the policy lasts. There is usually a deferred waiting period of several weeks before payments begin. It is distinctly different from illness or injury insurance, which pays a lump sum instead.
Illness Insurance
This insurance covers a critical illness, such as a heart attack, stroke, or cancer, but exact coverage may vary depending on your policy.
The payment is received like that of life insurance, in that it is a lump sum and can be used in whatever way you see fit. Typically this payment will go to something related to your care or income replacement, but it doesn’t have to.
Injury Insurance
Injury or Accident Insurance covers you if you have an accident that prevents you from working. What qualifies as an accident will vary between policies, so make sure you review what’s included.
These policies typically don’t include injuries that have occurred while the covered person is intoxicated or committing an illegal act.
Long-term Care Insurance
The costs for long-term care can be massive. Long-term Care Insurance would reduce these amounts should you need care in your home or a facility.
These policies provide ongoing cash payments but read the details carefully to determine exactly how your policy would work.
Health Insurance
A Health Insurance policy varies widely based on your country of residence. Typically you pay a premium in exchange for coverage of a wide range of healthcare needs. How this is structured depends on where you call home.
Final Thoughts
Imagining adversity that may come your way is not anyone’s idea of fun, but it’s a good idea to take steps to protect yourself in case these things happen. Obtaining a set of personal insurance policies ensures your loved ones would be okay. The peace of mind is well worth the cost of the associated premiums.
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