8 Dangerous Insurance Lapses That Could Bankrupt You

As you work hard to get ahead financially, an unexpected accident or medical issue could suddenly drain your savings fast. That’s why getting the right insurance is so critical.

Insurance coverage provides a way to protect your wealth from potential liabilities. Unfortunately, it’s all too easy to overlook a potentially life-changing insurance gap until it’s too late.

Don’t make this mistake. Instead, explore the following insurance coverage gaps and confirm that you have the coverage you need before trouble strikes.

Health insurance can be an expensive part of your budget, especially if you don’t have a convenient option available through your employer. But opting to go without health insurance is a big risk.

Getting in over your head with medical bills is more common than you might think. If you get sick, medical bills can add up quickly. Right now, 79 million Americans have medical bills or debt problems related to health care, according to The Commonwealth Fund.

Even if you have health insurance, it might not provide the coverage you need when traveling overseas. Instead, consider purchasing travel medical insurance to make sure an insurance company foots the bill during a medical emergency.

Long-term care insurance is another coverage that can protect your finances against the medical costs often associated with old age. As we age and health care costs rise, long-term care costs could wipe out a lifetime of savings at a startling pace.

This type of coverage might not be for everyone, but obtaining long-term care insurance is an option to protect your finances during your final years.

Most homeowners carry homeowners insurance. After all, mortgage companies usually require the homeowner to carry a baseline amount of coverage. However, simply purchasing a standard home insurance policy might not offer all the coverage you need.

For example, a standard homeowners insurance policy does not include flood insurance or earthquake insurance. To get these forms of coverage, you typically need to purchase a separate policy or add-on to the coverage to your existing insurance policy.

As a renter, you might think you don’t need any insurance coverage. While you don’t need to insure the property itself, it’s a good idea to purchase renters insurance to protect the value of your possessions. Your landlord’s policy will not cover your own possessions.

Without renters insurance, you could end up starting from scratch after a burst pipe ruins your household items. Plus, the right policy can help you pay for alternative lodgings if your place is temporarily uninhabitable after a disaster.

Homeowners and renters insurance policies also include some level of liability coverage. For example, if your dog bites a guest or an acquaintance trips and hurts themselves on your property, this coverage can help you pay for legal representation and any subsequent damages you owe.

Most states require drivers to carry a minimum amount of auto insurance. Although the minimum is a necessary place to start, the baseline protection generally isn’t enough.

If you stick with minimum coverage and cause an accident, the policy will only protect your finances up to the liability limits. For a policy with minimum coverage, those low limits might not cover the entire cost of damages, especially if you are sued.

You will be responsible for paying any bills out of pocket that your insurance policy does not cover.

You also will likely want to pay for comprehensive and collision insurance, which reimburse you for damages to your own vehicle. If you have an auto loan, your lender will probably require you to buy these types of coverage anyway.

If you have many assets to protect and don’t think your current policies offer enough protection, consider buying an umbrella policy.

An umbrella policy provides extra liability protection beyond your auto and home insurance policies. Fortunately, purchasing an extra $1 million or $2 million in coverage is relatively inexpensive. This type of policy can be a lifesaver if you are sued and end up having to pay a large judgment.

If you own a business, a business owner’s policy — often referred to as a BOP — can be critical. Essentially, this type of policy includes general liability, commercial property, and business income coverage.

As a business owner, protecting your business against liabilities can prevent financial disaster, especially if your business is destroyed or you are sued.

Life insurance offers a way to protect your family’s financial situation. If you unexpectedly die without adequate coverage, your loved ones could struggle financially.

Many experts recommend getting a term life insurance policy with a coverage amount sufficient to cover your family’s financial needs. But other types of life insurance coverage might be better for your situation. 

Speak with a financial advisor or insurance agent about which policy might be right for you.

If you rely on a regular income to pay your bills, going without disability insurance is a risk. Unfortunately, a disability could prevent you from working, which could mean your income dries up.

A disability policy will provide some level of income while you are unable to work. This income stream could provide a financial lifeline during an emergency, possibly even giving you enough breathing room to move beyond living paycheck to paycheck.

The right types of insurance coverage offer a safety net when things go wrong. No one expects to be put into a precarious financial situation, but it happens.

As you acquire the right insurance products, don’t overpay for coverage. Instead, make the effort to shop around. Comparing quotes can help you save money on car insurance and other types of policies.