Getting sued, injuring others, and getting disabled are all terrible events that seem unlikely, but actually, happen more often than you think. In this blog, I will share three types of insurance that you’re probably forgetting. You may want to consider getting these three types of insurance to protect your hard-earned money. Now I’m not an insurance agent and I’m not here to upsell you, our firm does not sell an insurance product so I’m just looking out for you.
Long Term Disability Insurance
The first type of insurance that you might be forgetting is long-term disability insurance.
What is long-term disability insurance?
Long-term disability insurance covers part of your income each month if you are unable to work for a long period due to an illness or disability. This includes a permanent disability that leaves you unable to return to work. If a truck slams into my car and I can no longer perform my job as a financial planner, my long-term disability insurance will kick in and pay me a certain percentage of my salary.
Everybody knows the need for life insurance but actually, the chance of getting a disability is greater than the chance of an untimely death. Now, before you go shopping for long-term disability insurance, check with your employer first because a lot of companies and non-profits or the government, state or federal, might be offering you long-term or short-term disability benefits. The coverage typically ranges from 50% or 60% of your salary. This may cover you for five, 10, 15 years, or until the age of retirement depending on the policy. Now, some financial advisors might try to upsell you to get long-term disability insurance but double-check with your employer first.
Are there any instances that are not covered under long-term disability insurance?
To receive the benefits the injury must have happened after the insurance started and sometimes after a certain waiting period. Some examples of instances where they are not covered include self-inflicted acts, criminal activities, and operating a motor vehicle while intoxicated. Depending on your medical history, there may also be individual exclusions. For example, if you have a herniated disk then you might be excluded from claims related to spinal injuries.
There is also a short-term disability that covers you for around three to six months. In my experience, usually, mothers after they give birth are typically qualified. You can check your HR to see if short-term disability is included and what it specifically covers. Long-term disability usually begins once the short-term disability coverage ends.
How much do long-term disability insurance policies cost?
It depends on your situation. The healthier you are, generally the lower the cost. Costs are usually higher the older we get, and it’s also higher for women.
How long do you need long-term disability insurance for?
As long as we’re working, we would need this insurance policy. If you’re wondering, I personally pay around $62 a month to get around $5,100 in long-term disability benefits.
Renters Insurance
The second type of insurance that you might be forgetting is renters insurance.
What is renters insurance?
Renters insurance provides coverage for personal belongings, liability, and additional living expenses for covered losses. It also covers you for an accident at your residence. Many renters are under the impression that their landlords insurance policy will cover their belongings but this is not the case. Renters insurance is similar to home insurance with the exception that is doesn’t provide coverage for the dwelling itself.
How does renters insurance work?
If you experience loss in your rented space, then renters insurance can help cover the associated costs. There are two types of coverage options under a renters policy. These include actual cash value coverage and replacement cost coverage. Actual cash coverage will reimburse you for the value of the items at the time of damage or loss. Replacement cost coverage will cover the cost it takes to replace the items lost or damaged.
Why is it important to have renter’s insurance?
Without renters insurance, it’s up to you to replace all of your belongings in a fire, flood, burglary, or other disasters. It is also up to you to provide coverage for any accidents at your residence.
If you have a dinner party, you host your friends, your family members, one of your guests drinks alcohol, drives under the influence, gets arrested, his or her parents can sue you for that. Your renter’s insurance can help cover you for liability damages. If your dog runs out of your house and bites your neighbor, your renter’s insurance can help cover you for that. Interestingly, this happened to me. When I was growing up, I was riding my bike on the street and there are other kids in the area but Rex came after me, bit my leg. It took them a while before they could get Rex’s jaw out of my leg. But anyway, if my parents decided to sue my neighbor back then, then the renter’s insurance policy will kick in.
How much does renters insurance cost?
It usually costs around $200 a year to get around $300,000 in liability coverage inside a renter’s insurance policy.
Umbrella Insurance
The third type of insurance that you might be forgetting is umbrella insurance.
What is umbrella insurance?
An umbrella policy adds an extra layer of protection for you and your assets when you need coverage that exceeds your other types of insurance. If you have significant assets, then it’s worth getting umbrella insurance.
Why is umbrella insurance important?
Umbrella insurance kicks in when your base liability limits have been reached. Without umbrella insurance, if your other insurances have been exhausted then you could risk losing your house, savings, and other assets. It will ultimately protect you from losing everything in a lawsuit. For example, if you prepare extra sandwiches for your son’s field trip and the other students eat it and get food poisoning, their parents can sue you. If you’re backing up your car and you hit a child, the child’s parents are not going to sue you for $100,000, they’re going to sue you for everything that you’ve got.
In these types of events usually, either your auto insurance or your renters or homeowners insurance liability coverage will kick in, but sometimes it’s not enough. That’s when the umbrella policy will kick in. It will cover you for around one million or two million dollars depending on your policy.
What doesn’t umbrella insurance cover?
Umbrella insurance won’t cover your injuries or damage to your own property. For example, business losses, intentional criminal acts, or damage to your personal belongings.
How much does umbrella insurance cost?
It usually costs less than $200 a year to get one million dollars in umbrella liability insurance policy.
Get yourself insured today!
There are many different types of insurance available, but we often find that these three insurances are the common ones that people are forgetting. These are smart insurances for healthy, employed individuals who want to make sure that they have a secure financial future.
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FAQS
1) What does long-term disability insurance cover?
Long-term disability insurance typically replaces a portion of your income if you become unable to work due to illness or injury for an extended period. Policies vary, but benefits often begin after short-term disability coverage ends and may last several years or until retirement age.
2) How is long-term disability insurance different from short-term disability insurance?
Short-term disability insurance usually covers temporary conditions, often lasting three to six months. Long-term disability insurance provides income protection for longer periods—sometimes many years or until retirement—depending on your policy terms.
3) What exclusions should I be aware of with long-term disability insurance?
Common exclusions can include injuries resulting from self-inflicted harm, criminal activity, or substance misuse. Pre-existing health conditions may also be excluded. Always review your specific policy to understand what is and isn’t covered.
4) What does renters insurance include?
Renters insurance generally covers:
Personal belongings (furniture, electronics, clothing) against theft or covered damages.
Liability coverage if someone is injured in your rented space.
Additional living expenses if your rental becomes uninhabitable due to a covered event.
It does not cover damage to the building itself—that’s the landlord’s responsibility.
5) Why is renters insurance important if my landlord has insurance?
Your landlord’s policy typically covers the building, not your belongings. Without renters insurance, you would be responsible for replacing your possessions or covering liability claims if someone is injured in your rental.
6) What is the difference between actual cash value and replacement cost in renters insurance?
Actual cash value reimburses you for the depreciated value of your belongings.
Replacement cost reimburses you for the amount it would take to buy new items at today’s prices.
Replacement cost coverage generally costs more but provides broader protection.
7) What is umbrella insurance?
Umbrella insurance provides an additional layer of liability protection beyond what’s included in your homeowners, auto, or renters policies. It can help protect your assets if you face a lawsuit or damages that exceed the limits of your primary policies.
8) What doesn’t umbrella insurance cover?
Umbrella policies generally don’t cover your own injuries, damage to your personal property, business losses, or intentional criminal acts. It is designed primarily for third-party liability claims that go beyond other insurance limits.
9) Who should consider umbrella insurance?
Individuals with significant assets, high future earning potential, or situations that create potential liability exposure (such as owning property, driving frequently, or hosting events) may want to evaluate whether an umbrella policy makes sense.
10) How much do these types of insurance cost?
Costs depend on your age, health, coverage amount, and provider. As a general range:
Long-term disability: varies by income, age, and health status.
Renters insurance: often a few hundred dollars per year for basic coverage.
Umbrella insurance: commonly a few hundred dollars per year for $1 million or more in additional liability protection.
Premiums are individualized, so it’s important to request quotes based on your situation.
Alvin Carlos, CFP®, CFA is a fee-only financial planner, in Washington, D.C. He has a Master’s degree in International Relations from SAIS-Johns Hopkins. Alvin is the founder of District Capital, a financial planning firm designed to help professionals in their 30s and 40s maximize their money and retire by 55, through holistic financial planning and research-driven investing. Schedule a free discovery call today.
