1. Car Rental Insurance
With options such as loss damage waiver, liability and personal accident insurance, car rental agreements have a seemingly endless list of possibilities that will jack up the cost.
Get it if: you'll be adding authorized drivers who aren't on your plan, or your personal auto insurance coverage is limited (e.g., you don't have collision or your deductible is very high). Just know that "if something happens to your rental car and you file a claim with your existing insurance company, your premium may increase and you could pay more in the long run than if you had bought a policy for the rental car," says John Egan, editor in chief of InsuranceQuotes.com, an insurance rate comparison site. However, if you already have coverage, it's usually okay to forgo car rental insurance, says Jeanne M. Salvatore, consumer expert for the Insurance Information Institute, as long as you make two phone calls to be sure. "One is to your car insurance company, and the other is to the issuer of the credit card you'll be using to rent the car to check the kind of auto coverage you currently have," she says. Many credit card accounts include secondary coverage that supplements your personal auto insurance when you pay for the rental with that card.
Timing: You can usually decide whether to purchase at the rental counter.
Watch out for: coverage when traveling on business, since your personal auto insurance might not apply. Check with your insurer beforehand.
2. Long-Term Care Insurance
A policy can cover daily care that goes beyond what basic health insurance encompasses, namely nursing home, assisted living or home health care expenses. When researching options, consider factors such as daily benefit (which defines the maximum available to pay for daily caregiving), length of coverage (five-year plans are most popular) and wait time (how long before the benefit kicks in).
Get it if: planning for the future is important to you, and you have the funds to do so. About 70% of people over age 65 need long-term care services at some point, according to the Department of Health and Human Services' National Clearinghouse for Long Term Care Information. While it's usually cheaper in the long run to buy it when you're younger (say, in your 40s or early 50s), purchasing it when you're in good health is crucial too because the premium is much lower and you're more likely to get approved.
Timing: Family health history is a factor, so if something like heart disease is prevalent, purchasing sooner rather than later is wise. Most pre-existing health conditions make it very challenging to get affordable coverage.
Watch out for: premiums that may not be fixed and could increase at any time. It's also smart to check now whether the policy pays the facility directly or you'll be required to handle expenses out of pocket and wait to be reimbursed.
3. Identity Theft Insurance
When an identity is stolen, expenses for paperwork and legal fees to restore accounts and clear the victim's name generally follow. Those costs may be covered by this type of insurance.
Get it if: monitoring your accounts tends to slip through the cracks. "We're all equally at risk for personal identity theft," says Salvatore, so this is a matter of personal preference. If you regularly keep tabs on your credit by requesting a free annual credit report (at annualcreditreport.com), and review statements each month, that should be enough to stop any potential problems. "Also, some home and renter's insurance policies offer ID theft coverage," says Egan.
Timing: An ID theft policy can be taken out at any time.
Watch out for: the fine print. ID theft insurance reimburses only the costs to recover from identity theft; it does not cover monetary losses caused by the theft.
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4. Vacation Insurance
If you decide to take extra precautions against unforeseen events that could lead to a cancellation or interruption of your trip, make sure the reason — weather disaster; cruise ship illness outbreak; vacation provider going out of business; injury, illness or death of a family member — is listed as covered. Insurance may reimburse you for the cost of the trip, lost luggage, emergency medical attention or expenses that result from travel delays. "Some policies even have a 'cancel for any reason' clause," says Salvatore, though you'll pay extra for that coverage.
Get it if: you have a medical condition or an immediate family member is very ill, or if losing the cost of the trip would be financially devastating. It's also a good idea for adventure travel, when injuries are more likely, and for overseas destinations. Vacation insurance may also bridge any gaps in your health insurance, says Steve Dasseos, president of TripInsuranceStore.com, which specializes in customized travel insurance. For instance, some state- sponsored plans don't pay for doctor or hospital visits outside your home state. "Likewise, national health care plans generally do not cover people outside their country of residence." Don't bother with insurance for inexpensive getaways.
Timing: You don't have to pay the entire cost up front, so when you're planning a trip far in advance, says Dasseos, insure only your deposit. As you make additional trip payments, increase the coverage accordingly.
Watch out for: travel insurance plans that aren't offered by a licensed seller or regulated by the state in which they're sold, which should always be avoided.
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5. Personal Property Insurance
Adding a rider to your home insurance can protect the cost of expensive items like jewelry, musical instruments, and fine art or other collectibles. While most homeowner's insurance provides coverage for losses in some instances (fire or theft), it's limited and subject to a deductible, whereas personal property policies may have no deductible.
Get it if: you have costly items. "Look at what your coverage limits are on your home or renters policy, and whether you've adequately covered your personal belongings," says Egan.
Timing: Insure prized possessions as soon as you acquire them.
Watch out for: higher premiums if you want to get the replacement value of an item instead of its actual cash value at the time of loss (since most items depreciate).
Your Must-Have Insurance Checklist
- Home: Consider adding separate flood insurance to your policy. If you're in a flood zone, it's probably mandatory, but not if you live on the outskirts. "Flood damage is not covered under standard home insurance, whereas 90% of all natural disasters in the U.S. involve flooding," Salvatore says.
- Renters: If, for instance, there's a fire at your apartment, your landlord's insurance isn't going to cover the loss of your property.
- Car: Practically every state requires auto liability insurance. Weigh additional coverage options — from collision to comprehensive — based on your needs. Expanded coverage is recommended for families with teen drivers.
- Health Medical Benefits: are a must, so take the time to familiarize yourself with the terms of your coverage. It's also a good idea to reassess your coverage needs and understand policy changes as they happen.
- Life: If you have kids living at home or who are financially dependent on you, a life insurance policy will help cover living expenses should anything happen to you or your spouse.
Go Comparison Shopping
- Do your homework: The national association of Insurance Commissioners (NAIC) is a good starting point for consumer education, and for a link to your state's insurance department.
- Shop around for the specific service you require, not just for the best rates.
- There is no one-size-fits-all insurance plan or carrier. Some companies have far better rates for smokers than others, and some accept pre-existing conditions, like diabetes, that others won't.
- Work with an agent. Professional guidance will help you determine the right amount of insurance for your situation so you don't end up paying for more than you need.
- Call your current insurance company. See if it offers the additional services you're interested in. If so, you may be able to bundle your various policies and score a discount.
Originally published in the May 2013 issue of Family Circle magazine.