Insurance is something everyone knows they need. In fact, certain types of insurances are even required under law. If you live in Minnesota, you must have at least a minimum level of car insurance to be able to own and drive a car. Another mandate says that if you owe a certain amount of money on your home, you have to have private mortgage insurance to insure against your default. Then of course you likely have homeowner’s insurance so that if there’s a hail storm, tornado, flood or fire, there would be coverage for the loss of your personal property and for repairs. The same goes for renter’s insurance. You can insure your health, your phone, and even your pets.

These types of insurance are all crucial, but there are 3 types of insurance people delay in getting that are even more important than everything above.

Life Insurance

Life insurance is something every adult should consider having. Life insurance takes on additional importance if you are partnered or married or if you have children. Life insurance pays out cash to your beneficiaries if you pass away. There are a number of ways to get life insurance, but one of the most common ways is through your employer. Many employers offer life insurance as a benefit to their employees. It’s common for the amount of insurance offered to equal one to two times the value of the employee’s annual salary. Employer insurance policies typically only last as long as you’re employed with the company. So once you live, you will need to consider finding insurance elsewhere.

Life insurance is also available for purchase privately through insurance agencies and financial planning and advising firms. There are a variety of insurance products you can get from these firms and agencies including term policies, whole life policies, or policies you can convert over time. When you purchase insurance from a private company like these, you can determine what type of insurance will fit your budget.

It’s vitally important to make sure that in addition to selecting a policy that will fit your budget, that you make sure you have the right amount of insurance to cover the needs of your partner, spouse or family if you pass away. To do that, you will want to take inventory of your lifestyle, the money that comes in each month and the money that goes out to pay for your monthly bills. You should consider if these amounts would increase over time as your kids grow or if there would be an increased need if you’re gone. You might quickly discover that 1x your salary or $100,000 might be too little insurance to cover your family’s financial wellbeing in the event of your death.

Disability Insurance

While the importance of life insurance is clear and we often hear it discussed in our friends’ circles or on tv commercials, disability insurance is usually a less addressed topic - even though I think it’s just as important as life insurance. We know that everyone eventually will pass away, but there’s also a chance that during the working years of your life you might suffer a period of temporary mental illness, a health episode, an accident or other injury that prevents you from being able to work for a period of time. Many employers have insurance for your temporary disability where they pay a portion of your salary for up to a set number of weeks or months. You can also buy disability insurance privately just like you can buy life insurance which we talked about above.

It’s so important to make sure that you have enough disability insurance because remember, while you’re living, the death benefit of your life insurance is useless to you because you’re still here. Your bills will still be here, too. So you want to find a way to make sure you have the right amount of income continuing to flow into your household to cover your period of disability, hopefully in full, for as long as you need it to. That way, you won’t find yourself draining your savings, living on credit cards or taking loans from your retirement accounts in order to meet your monthly obligations until you’re well again.

Burial Insurance

Probably the least discussed type of insurance out there available to people engaged in pre-planning is burial/cremation or funeral insurance. This type of insurance goes by several different names and is available from a number of places in lots of different varieties. There are options to purchase policies from funeral homes or cremation services. These policies can also be purchased from private brokers, then the policies can be signed over and ultimately paid out to the funeral home, cemetery or cremation service of you or your family’s choosing when the time comes for the policy to be used.

These policies can be of tremendous value because the cost of cremating a loved one or laying them to rest can be immensely expensive. A casket, line and vault, private funeral service, chapel rental, and burial plot can cost upwards of $15,000 for even lower tier service offerings. The cost of headstones and grave markers can vary widely as well. This could be a very big financial burden on your family is they are caught without funds set aside specifically to pay for the cost of burying you. Getting insurance for this ultimate certainty has the potential to be a huge gift and benefit to your family to not have added financial pressure when they are grieving your loss.

Of course once you have all of these insurances, it’s important to ensure that you have the appropriate ownership status and the right beneficiaries lined up to receive the benefits of these plans. Your insurance should tie back to your existing estate plan, if any, or if you don’t have an estate plan yet, you should look into getting the rest of your estate planned out to make sure your insurance fits into a holistic plan neatly to achieve all of your desired outcomes and goals.

This article is a service of Legacy Estate Planning. If you have questions or want to go deeper, please email us at taylor@legacyestateplanningmn.com or book a call: Click Here to Book a Call.

Or check out my new book: The Parents’ Planning Pack: 10 Steps to Making Sure Your Kids Are Well Cared For - No Matter What.