There are many things we can get insurance for – our life and health, homes, cars, cell phones, the list could go on. These are all classed as investments and are perhaps the investments we’re most likely to insure. Getting the correct insurance, however, is another game entirely. For example, 16% of people who participated in a study about auto insurance didn’t realize that the entire policy is rendered void if the insurance company has the wrong job description documented.
The same applies to homeowners insurance – only specific things like theft and fire are covered in general policies – they often require insurance riders (more on that to follow) to protect against weather-related damage, for example.
Below, we’ll look at the typical investments people insure, where they might go wrong, and other financial investments that are tricky to insure.
What Are The Most Common Insurance Policies?
Part of adult life is buying expensive things and paying more on top to insure them. Some investments are classed as essential to insure, like home insurance, and others are often a personal preference, like cell phone insurance. Below, we’ll look at the most frequently acquired insurance policies and things to watch out for when taking out insurance.
Homeowners Insurance
Homeowner’s insurance is essential. In May, the average cost of buying a home in the US reached $400,000. Now, while someone isn’t going to uproot your home and run away with it, there are several circumstances – from weather damage to burglaries – that can damage the wealth a home accumulates. Like many insurance policies, homeowners insurance isn’t straightforward. Typically, standard policies will cover loss or theft of possessions up to an agreed value, interior or exterior damages not including the weather, and things like leaks, fires, and other accidents.
Homeowners can, however, add a rider to the standard insurance policy to act as a way of customizing insurance policies. A rider is an addon to a standard insurance policy that might cover scheduled personal property like jewelry to their appraised value or earthquake damage to cite a couple of examples. A standard policy would cover personal items but not the appraised value. It might also cover flood damage from appliances, but not natural disasters – that’s where a rider becomes effective.
Research standard insurance policies and the various riders that providers can offer. Each provider will offer variations of standard insurance policies, so it’s essential to understand what is covered and what isn’t.
Life Insurance
52% of Americans have life insurance – it’s not necessarily an essential investment, but it is an investment into the future of your loved ones. It’s essentially a policy that you pay, which means when you pass away, your loved ones have funds to support them. The idea is that the financial impact of losing a financially providing family member isn’t as damaging, but each policy is different.
Technically, this investment is one for other people, not your own, but it’s an almost essential policy to consider if you have loved ones that rely on you. Whole life is the most common type of life insurance policy that essentially provides cash benefits to your beneficiaries once you pass away. There’s also a guaranteed cash value throughout the duration of the policy, meaning if you cancel, you will get the money back.
There’s also term life insurance, mortgage life insurance, variable life insurance, and universal life insurance. All work differently but ultimately result in beneficiaries having financial support when you’re no longer around. It’s well worth researching the various policies, especially reading into what they do and don’t cover.
Car Insurance
Car insurance is essential – the fine in the US can be up to $5,000, depending on which state you’re in. The average cost of car insurance is roughly $1,771 per year, often dependent on age and experience. Like with home insurance, it’s common for car insurance policies to have riders that provide drivers with more coverage. For example, if you are involved in a road traffic incident you’re generally covered by standard insurance policies. If you hit an uninsured driver and your policy doesn’t have the uninsured rider, you might find that your insurance won’t pay out.
Drivers also need to be mindful of the details of the policy. As mentioned in the introduction, drivers with out-of-date information on a policy – even down to job roles – might find their insurance contract isn’t valid. The same applies to mileage. Vehicles that have exceeded the agreed covered mileage on the policy won’t find providers reaching into their pocket to pay out.
Can You Insure Other Financial Investments?
Other investments, such as ones in savings accounts, are covered by the banks. Investments into the stock market or cryptocurrency, however, aren’t. Can you insure all your financial assets? The short answer is no – assets in the form of financial investments such as into the stock market are generally not covered. One potentially saving grace, however, is investing through a brokerage or financial planner. Sometimes, these companies might use the Securities Investor Protection Corporation to cover investments. Still, that would only provide cover in special circumstances, such as if a brokerage went bankrupt with your money still in tow.
That shouldn’t put you off financial investments such as the stock market, as they can be an invaluable financial asset to gain.
No matter what you invest your money into, if it’s substantial enough – like a home or a new car – you should insure it. There are tons of insurance policies to explore that cover a range of circumstances. Diligent research can ensure you pick the right insurance policy and get the most out of it with the associated riders.
