Deciding what insurance is important

Jun 06, 2012

When planning for retirement it is important to determine what is most important.

In a Buyer Beware blog piece for MarketWatch, Jeanette Pavini outlined what insurance coverage is most important and how to obtain the most cost-efficient policies on the market. While some types of insurance such as pet insurance and home warranties offer an obvious benefit to consumers, they are not as important as other policies such as life insurance and disability insurance.

According to Pavini, pet insurance typically comes with a long list of restrictions that the provider will not cover. Thus, many consumers would likely be better off setting money aside every month as emergency funds in case a pet needs a medical procedure or other costly expense. The premiums for pet insurance are fairly reasonable, but many policies leave the responsibility of covering copays, medications and high deductibles to the consumers. Most of these insurance policies increase their premiums and coverage deadlines with the age of the pet, when they will most likely need protection.

Life insurance, on the other hand, can be purchased early and last a lifetime. The policies can cover a number of instances such as death benefits, access to cash or aid in major purchases or investments later in life. Many providers offer policies specifically designed for patients with pre-existing conditions that are affordable so as not to punish the consumer for falling ill. Life insurance can also be used to help pay for medical expenses or other costs in retirement to help make retirement savings last longer.

Another important form of insurance for aging Americans is disability insurance. Often purchased in conjunction with life insurance, disability insurance can help replace lost paychecks when a consumer suffers a disabling injury and cannot work for a period of time. The insurance works to protect consumers from unexpected financial hardship as a result of an injury or accident so they can maintain their independence and integrity. The coverage can help take care of basic physical needs and daily living expenses when the policyholder can no longer earn an income.

Before adding disability insurance to a life insurance plan or retirement strategy, consumers should be aware of many myths and realities surrounding the financial product.

It is often incorrectly believed that disability insurance is used for protection against accidents. In reality, disability insurance can prevent against an accident or illness from putting the policyholder in a financially vulnerable position. It can also be used to supplement income during planned absences such as major surgery or pregnancy.

In addition, many consumers believe younger generations do not need to worry about disability insurance. However, the Census Bureau found 11.4 percent of Americans between 25 and 44-years-old are affected by a disability, and the insurance can provide protection for them as well as the aging population.

Many consumers will also opt out of purchasing disability insurance, believing that they have a small chance of becoming disabled. The Social Security Administration estimates 30 percent of Americans entering the workforce will become disabled prior to retirement. The Census Bureau adds that more than 50 million Americans currently have a disability of some kind.

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