Hackers stealing your identity. A freak storm on your wedding day. Fido swallowing his squeaky toy.
These unexpected events can wreak havoc on your life—and your money.
And while they don’t happen often, when they do, you can find yourself having to do triage on your finances.
So is it worth it to get a bonus insurance policy to protect yourself from such infrequent—but potentially financially crippling—Murphy’s Law moments?
We rounded up five types of insurance that aren’t must-haves—but could be nice-to-haves—to help you determine whether they could be dollars well spent.
To Protect Your Identity …
From the attacks on Anthem to the I.R.S., it’s safe to say that companies and government agencies have had some difficulty keeping hackers at bay.
In fact, the Federal Trade Commission reports that identity theft has been the top consumer complaint for 15 years in a row, while a 2015 study from Javelin Strategy and Research estimates there’s a new identity fraud victim every two seconds.
So it’s no surprise that insurers are responding with identity theft policies, which can cost $25 to $60 per year for coverage ranging from $10,000 to $15,000.
Most policies offer account and credit monitoring, and will cover the administrative costs of restoring your stolen accounts. They won’t, however, compensate for financial losses resulting from the identity theft.
Is It Worth It? Yes—if you don’t have time to monitor your identity yourself.
That’s because identity theft protection does little to prevent the theft from occurring, says Steve Weisman, a lawyer and author of “Identity Theft Alert: 10 Rules You Must Follow to Protect Yourself from America’s #1 Crime.”
“Many of these services merely enable you to learn sooner that you’ve become a victim,” he explains. “Generally, these policies don’t do anything you can’t do yourself. However, if you don’t mind paying for the convenience of having your credit monitored, then identity theft insurance may be for you.”
How to Get Better Bang for Your Insurance Buck: Read the fine print carefully, Weisman says. For example, high deductibles—commonly up to $500—could negate the value of a policy.
And be sure to confirm what services are included: Will the insurer actually assist you in doing the legwork necessary to restore your identity, or just cut you a check for the fees you incur to untangle the mess yourself? The former may be more worth it.
A bonus tip from Weisman? Review your homeowner’s insurance policy, which might offer an identity-theft benefit at little or no extra cost.
To Protect Your Wedding
With the average price of a wedding now clocking in at a whopping $31,213, why wouldn’t you want to protect your “I do’s” from disaster?
A typical wedding insurance policy might cover cancellation or postponement, weather-related losses, vendors backing out, and illness or injury to members of the wedding party. Additional coverage can include your rings, gifts, and damage to your wedding attire.
Policies usually cost about 1% of your wedding budget, which means $500 could reimburse up to $50,000 worth of expenses, says Kristen Ley Green, cofounder of wedding public relations and marketing firm Something New for I Do.
Is It Worth It? If you’re planning a far-off ceremony, there are too many variables you can’t account for—and we’re not just talking El Niño grounding flights.
According to data from Travelers Insurance, the main reason 44% of people filed wedding claims last year was due to vendor-related problems.
“What happens when your venue burns down, or a snowstorm postpones your wedding? Most brides think the odds of this happening are slim—but we’ve witnessed both,” Ley Green says. “Wedding insurance can make a difference. It covers lost deposits due to catastrophes, and if you have to postpone, it covers nonreimbursable expenses.”
How to Get Better Bang for Your Insurance Buck: To help determine how much coverage you may need, look closely at all of your vendor contracts, including the venue, caterer, photographers, videographers, musicians, DJs and planners.
“Most agreements typically include a force majeure clause, which means that if an act of God occurs, vendors have the right to cancel your wedding,” Ley Green says. “So make sure you know what this entails: Do you get to move your date? Do you lose your deposit?”
Bottom line: The less flexible your vendors are, the more important wedding insurance becomes.
To Protect Your Pets
Americans sure do love their four-legged family members. According to the American Pet Products Association, pet owners in the U.S. are expected to spend nearly $16 billion on vet care alone this year.
And based on newly released findings from a Country Financial Security Index survey, 37% of pet owners would dip into their savings to pay for unexpected high veterinary costs.
To help offset some of these hefty out-of-pocket medical expenses, some people are opting for pet insurance, which can range from about $50 to more than $100 per month, depending on the breed and whether you’re insuring a cat or dog.
But just like human health insurance, pet insurance is offered at varying levels of coverage, deductibles and exclusions—so owners have to do some digging to see if a policy provides real value.
Is It Worth It? Yes, if you’re willing to take on debt for the sake of your pet.
“If you’d be willing to spend tens of thousands to save a pet, then it’s worth it,” says Patricia Born, a professor of risk management and insurance at Florida State University.
“And if you pick a policy in which most regular vet visits are covered, then I think it’s worth it for most pet owners,” she adds. “There have been a lot of health care advances for pets, so there’s a market [for pet insurance] and enough providers that people can get quotes [to comparison-shop].”
How to Get Better Bang for Your Insurance Buck: Pet insurance policies tend to have a lot of exclusions, so understand what they are before you buy.
For instance, preexisting conditions—including those common to certain breeds, like hip dysplasia—aren’t covered, says Adam Karp, an animal law attorney in Bellingham, Wash. Certain policies may also put a cap on the age of eligible pets.
Insurers can also impose annual, lifetime or per-incident dollar limits on treatment. Once you’ve reached the lifetime cap, in particular, “you may as well scrap the policy,” Karp says.
Before you sign up, it’s also worth checking with your vet’s office to see if they offer a wellness plan, in which such basic services as vaccinations and deworming are bundled for a monthly fee.
To Protect Your Family From Funeral Costs
The death of a loved one is stressful enough—and receiving an astronomical funeral-home tab doesn’t exactly help those stress levels.
According to the National Funeral Directors Association, the median cost of a funeral with a casket was $7,045 in 2012, the last year for which data is available.
To help foot the bill, you may be tempted to look into burial/funeral insurance, also known as final-expense insurance, which typically pays $10,000 or less, says J. Robert Hunter, director of insurance at the Consumer Federation of America.
However, the policies usually come with high premiums—by some estimates, up to 10 times more than what you’d pay for a term life insurance policy.
Is It Worth It? No. Burial insurance is basically whole life insurance that offers a lower level of coverage at a higher premium.
“The cost is very high compared to regular life insurance,” Hunter says. “And dependents need much, much more than [what those policies offer].”
How to Get Better Bang for Your Insurance Buck: Instead of burial insurance, consider simply tacking $10,000 worth of coverage onto a current term life insurance policy, which should come at minimal extra cost to you, suggests Hunter.
“Regular life insurance should cover everything the dependents need after the death of a financial provider,” he says, “including the relatively minor costs of a funeral.”
To Protect Your Valuables
Do you own a prized painting or an heirloom necklace that’s been passed down through the generations? Chances are, your homeowner’s policy doesn’t cover them for their full value.
Enter scheduled personal property insurance, which provides additional coverage above your homeowner’s policy for high-value items, like collectibles, jewelry, musical instruments and art.
The insurer agrees to a value on the item, weighs the likelihood it could get damaged or stolen, and then sets the premium—which can vary greatly, but could be about 1% to 2% of its value.
Is It Worth It? Depends on how much the item is worth to you.
“It comes down to how risk-averse a person is,” Born says. “You may be willing to pay $1,000 to insure a ring, instead of replacing it for $10,000, but [someone else might not be].”
Plus, it can be hard to determine whether you’re getting a decent premium because “there’s not a lot of data for special items to know whether what you are being offered is fair,” she adds.
How to Get Better Bang for Your Insurance Buck: You could just up your homeowner’s policy, especially if your items have a value you can prove, like an expensive TV, a computer or jewelry.
“Ask yourself, ‘If the house burned down, what would it cost to replace all the items in the house?’ ” Born says.
However, if we’re talking about, say, antique furniture with a subjective value, ask an independent insurance agent to give you quotes.
“In that case, insurers are less likely to overcharge because they know you can go somewhere else to get covered,” Born says.
LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc., that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. Unless specifically identified as such, the individuals interviewed or quoted in this piece are neither clients, employees nor affiliates of LearnVest Planning Services, and the views expressed are their own. LearnVest Planning Services and any third parties listed, linked to or otherwise appearing in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies.
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