Health insurance, life insurance, auto insurance, and homeowners or renter’s insurance easily dominate the majority of discussions about insurance. That makes sense because these well-known types of insurance are extremely important. There are however, many lesser-known types of insurances that get little public attention and many of which some people have never heard of. While they may not have as broad a need as the more common types, they can still serve a very important role in some people’s lives. What follows is our pick for 6 types of insurance you may never have heard of with a brief description of why you might need them.
Long-Term Care Insurance
What It Is – Long-term care (LTC) insurance provides insurance benefits to people who are unable to perform the basic activities of daily living (commonly referred to as ADLs) such as bathing themselves, walking, eating, transferring (getting in and out of a bed or chair), and handling their toileting needs. LTC insurance benefits might be used to hire home health aids to assist with ADLs, or to pay for the incapacitated person to receive treatment in a nursing home or other facility.
Why You Might Need It – LTC insurance might be needed by some individuals depending on their personal factors such as age, health, genetic predisposition to certain diseases, and general financial situation. LTC insurance typically covers expenses which might fall between the gaps of traditional health insurance, Medicare, or Medicaid.
What It Is – Disability insurance is a form of insurance which pays benefits meant to replace all or part of a person’s income if they suffer a disability that keeps them from working. Policies vary in their definition of a qualifying disability, the amount of income paid, the time it takes for benefits to kick in after a claim is filed, and the duration that the disabled person receives benefits once they start.
Why You Might Need It – Disability insurance is different from worker’s comp in that the disabled person does not need to have suffered the injury while at work. Studies have indicated that depending on job responsibilities and lifestyle, the majority of disabling injuries do not occur while the person is at work and thus not covered by worker’s comp.
What They Are – Umbrella policies provide an additional “umbrella” of coverage over a person’s existing types of insurance, such as homeowners or auto insurance. The maximum coverage of these policies is exceeded the umbrella policy kicks in, providing the insured with extra protection. Umbrella policies also cover some types of incidents not covered by underlying policies.
Why You Might Need Them – Umbrella policies are great for people who have many assets they wish to protect, since the value of these assets might be exceeded by traditional policies. They are also useful for people who may be exposed to a large amount of liability and they provide peace of mind in general.
What It Is – Travel insurance provides protection for travel-related mishaps that can range catastrophic, such as a plane crash or medical emergency in a foreign country, to expensive inconveniences, such as flight cancellations and baggage coverage.
Why You Might Need It – Travel insurance needs vary depending on the circumstances of the trip, how expensive or serious a mishap would be, and individual tolerances for risk. It might be especially useful if the travel destination has poor medical facilities, an under-developed infrastructure, or frequent exposure to severe weather or civil unrest.
Loan Protection Insurance
What It Is – Loan protection insurance, also known as payment protection insurance or PPI, is designed to protect the insured party from defaulting on loans such as mortgage loans, car loans, credit cards, etc., if they suffer a financial hardship due to illness or job loss.
Why You Might Need It – Loan protection insurance is useful for people who have a large outstanding debt load and little personal savings. Not only might it prevent the person from having a car repossessed, being evicted, or otherwise losing their collateral, but it also helps prevents the accompanying damage to the person’s credit score.
What It Is – Mortgage insurance is paid for by the person taking out the mortgage, but is designed to protect the bank or lender from financial loss in the event that the borrower defaults on the loan.
Why You Might Need It – Mortgage insurance is unlike the other types of insurances on this list because it does not protect the person paying for it, but rather the lender of financial institution. It is not generally a type of insurance the borrower will want to voluntarily pay since it doesn’t offer them or their loved ones any personal benefit. Yet, it is included on this list because it is a type of insurance many homeowners come across at some point and there is a lot of confusion surrounding it. It is generally required by the lender if the borrower puts down less than 20% in a down payment when they take out their mortgage. It can be cancelled after the borrower has made payments that reduce the mortgage to less than 80% of the value of the home, since at that point it would have been as though they had put down a 20% down payment.
The types of insurances discussed in this article are not needed by all consumers. Instead their necessity will vary depending on personal factors, financial situation, and risk tolerance, just as the need for most other types of insurance also vary based on these criteria. It is our hope that this article educates people about their insurance options and that if they recognize a type of insurance they might need they can pursue further information and make a more informed decision. As always here at Beaty Insurance we are happy to assist with any additional questions or concerns you may have.