The desire to feel safe and secure is one of the basic human needs. Insurance helps us do just that, by making sure that we ourselves, the people around us, and our stuff are covered, in case of an emergency, loss, or damage.
Insurance is a need-driven industry and in order to consistently get the best coverage and best price, the prospective insured must clearly understand 5 things:
According to the Hierarchy of Insurance Needs, Health Insurance is the most important insurance for everyone, followed by auto and residential property insurance - to protect your mode of transportation and home. As your possessions and family grow, if you do not yet have a life insurance in place - you should look into it before you getting much older.
Below is the breakdown of the hierarchy of insurance needs:
The 3 top reasons why health insurance is the most important insurance for every Texan:
As of 2019, Texans no longer have to pay the individual mandate penalty imposed under the Affordable Care Act (ACA). This means that all Texas residents no longer have to pay the extra cost for not having health insurance. However, this does not defeat the importance of health insurance coverage because the benefits of being covered by a health insurance policy outweigh the drawbacks and costs.
You want to provide safety and health security for yourself and your family. A health insurance policy is something every Texan should have. You may ask the question, what kind of insurance do I need to get first? The simple answer is, you should get a health insurance policy first, so that you and your family can be provided additional protection in the case of emergencies. You do not plan to get sick, but the unexpected happens even to the most healthy people.
For instance, health insurance covers common medical expenses like ER visits and broken bones. The cost for medical procedures and the use of hospital facilities in Texas can go into hundreds of thousands of dollars. So if you or your family member needs emergency medical care, you may not be able to afford it without having a health insurance policy.
In 2022, over 5,000,000 of Texas residents did not have health insurance coverage. Meanwhile, Texas is one of the few states that offers a large variety of health insurance options meeting different needs and affordability levels. The most common health insurance options in Texas are: ACA and Short-Term.
In addition to health insurance, you can get critical illness insurance coverage, which helps if you get diagnosed with a critical illness. The critical illness insurance pays cash directly to you - the insured, for these types of unplanned expenses on critical illness.
The second most popular health insurance supplemental policy in Texas is hospital indemnity insurance, which helps with additional financial support, especially after an extended hospitalization. The benefits of a hospital indemnity insurance policy are paid directly to you and are paid in addition to any other health care coverage. Note that this supplemental coverage that is usually meant to work alongside your primary health insurance policy and helps pay out-of-pocket expenses like insurance deductibles, copays, and treatment.
It is important to note that when purchasing a health insurance plan in Texas, you may be able to get dental, vision, and hearing insurance coverage as optional add-ons or independent coverages. There is a wide range of Texas health insurance plan options for you to choose for yourself or your family.
Check with a Texas-licensed health insurance agent, to see what health insurance you qualify for and most importantly, which plan fits your particular needs. Ask your agent to re-check the insurance market once a year, to see if any better plan options have appeared.
According to the Hierarchy of Insurance Needs, the 2nd most important type of insurance in Texas is Property and Liability. This insurance requires that you own or temporarily have the use of the property you are trying to insure.
Once you acquire a property for personal and/or business use, you may need to get it insured, so if something happens to it - you get reimbursed for its repairs or replacement. Similarly, some property you might possess may be required to have a Liability coverage, where the others are being protected from damages as a result of your actions and your property. Both of these types of insurance are usually complementary to each other and purchased from the same (or similar source) - a Property & Casualty (P&C) insurance agent.
Auto insurance is usually the first type of property insurance anyone needs. As soon as you are old enough to drive, you typically need to start carrying some type of car insurance.
Texas law requires that you, as a driver, show proof that you can pay for the accidents you cause. This refers to Texas Liability coverage. Apart from this, different auto insurance coverages serve other important purposes for you. As a whole, auto insurance:
You want to be protected from financial liability and paying for the damages out of pocket. Texas is an “At-Fault” state as it comes to auto insurance, so the guilty party in the accident pays for the damages. This is why liability coverage is mandatory in Texas. If you cause a car accident; you will be held responsible for all associated costs, including legal fees and medical expenses. Auto insurance also may provide coverage for damage to your vehicle or any medical expenses you or your passengers incur after an accident. Auto insurance supplements health insurance policies because it helps pay for medical expenses health insurance may typically not cover. Depending on the type of auto insurance policy you purchase, you may get coverage for dental work and other medical treatments, resulting from a car accident.
A vehicle is being financed, your lender will also require you to purchase collision coverage and comprehensive coverage.
You rent or lend your car to a friend, you need to get auto insurance coverage. Typically, an auto insurance policy follows the vehicle it is covering, so if your friend who is provided for under your insurance policy rents or borrows your car and causes an accident, you will most likely be liable for the damages. This is when your auto insurance comes into play to ease you off the financial burden, so if you lend your car to a friend, you can rest assured that you have financial protection.
Even though motorists are required to have car insurance, some end up not purchasing auto insurance. So to protect yourself, you may need to purchase Uninsured/underinsured motorist coverage.
Approximately 23,385,535 private and commercial vehicles are registered with the Texas Department of Motor Vehicles (TxDMV). 20%, or almost 5 million Texas vehicles are presumed to be uninsured. If you are hit by an uninsured driver, your auto insurance uninsured coverage will settle your bills and take care of most out-of-pocket expenses.
The fallout from a collision accident or damage to your car by flood or fire can be incredibly tedious and money-consuming. With the appropriate auto insurance coverage, you can avoid the negotiations with other drivers and property owners involved in the accident because your auto insurance policy will manage the cost of repair or replacing your vehicle. Under the auto insurance policy, there are various coverages you can purchase to protect you against the unexpected. Consult with a state-licensed P&C insurance agent to get help selecting the auto insurance that fits your needs.
In Texas, home insurance is a necessity for homeowners and renters alike. Having a residential insurance policy is essential as it provides coverage for damages done to your home and pays compensation in the event of loss of personal belongings.
Home insurance can cover damages from incidents such as lightning, fire, hail, hurricane, windstorms, volcanoes, vandalism, fire, and theft. You may get a home insurance policy either as a homeowner or a renter.
A homeowners insurance is a type of property insurance that covers damages and accidents to the insured's property. As the name implies, coverage is extended to the official owner of the property, regardless if the owner resides on the property or leases it out.
Home insurance offers coverage for four distinct forms of incidents:
If you rent (lease) your residence, you need renters insurance. Renters insurance provides coverage for tenants for loss or damage to personal properties at the insured property location. Renters insurance is usually not a requirement for renting a residence. However, some Texas landlords may require you to have one before you sign the lease and move in.
On a broad scale, having renters insurance helps to ensure you are covered when liabilities from damages and losses that are not covered by your landlord's homeowners insurance occur. The incidents covered by a renters insurance policy include:
Condo insurance, otherwise known as HO-6 insurance, is especially beneficial to Texans who own condominiums as their primary homes, or use the units as vacation homes, or even put them up for rentals. Texas Condo insurance is not distinct and usually comes as a subset of a master insurance policy. Condo insurance protects the owners of condos similar to homeowners' insurance, except that it does not cover areas of the property that are shared with other condo owners. Roofs, hallways, elevators, and similar areas are covered by the Condo Association’s insurance coverage.
Condo insurance offers coverage for the following:
If you own a residence and you lease it to others, you need landlord insurance. Landlord insurance is designed to cover the property owner from liability claims and the physical rented property itself from damage.
Landlord insurance is usually not required, but highly advised to have. The only time it may be required is if the property is being financed and the lender makes this coverage a requirement to protect their investment.
Commercial insurance (also known as business insurance) is a vital requirement for business operations in the state of Texas. Some of the reasons why you need business insurance in Texas include:
Commercial insurance in Texas works in two major ways:
While commercial insurance is not a legal requirement to operate every business in Texas, it is yet vital. No business operating in Texas wishes for accidents or lawsuits, yet, they happen anyway. Investing in commercial insurance helps secure your business against unplanned and unexpected occurrences that may lead to unnecessary financial losses.
Another type of important business coverage is Life insurance. Life insurance is frequently used by businesses to:
According to the Hierarchy of Insurance Needs, the next most important type of insurance every adult in Texas should have is life insurance.
Life insurance can be divided into 2 main usage types:
While the insured is alive, life insurance offers multiple ways how it can be used as a financial tool for retirement planning. Alternatively, if the insured gets terminally ill, some policies may allow the use of the death benefit prior to the death. This helps lower the financial burden of having to pay for the treatment and to possibly offer a higher level of terminal care.
After the death of the insured, life insurance is further divided into two sub-groups:
Basic life insurance is intended to cover just that - the basic costs of the burial and any additional final expenses associated with the passing of the insured.
Legacy life insurance is any insurance where after paying for the final expenses of the insured, there is a significant sum of money left over, to be paid to a designated beneficiary. The beneficiary receives the death benefit tax free. The typical (average) face value (death benefit) of a Texas legacy life insurance is $600,000 to $1,000,000.
NOTE: If you want to get a life insurance with a face value of over $2.5 million, you may have to prove that you have the need for this amount of coverage. You either need to owe a large sum to someone of have an ongoing lifestyle which justifies this level of expenses, which your family may expect to maintain after your death. In other words, if you do not have a job, property, savings, and debt to justify the policy - you will not be able to get it, even if you can afford the payments.=
Financial experts consider life insurance as one of the vital pillars for financial planning. Besides paying for the final expenses, life insurance gives you the flexibility to use its benefits during retirement (Living Benefits), or to leave a considerable amount of money to the beneficiaries of your choice (using the Death Benefit).
The top 10 reasons to get life insurance in Texas:
Approximately half of Americans have life insurance coverage. Meanwhile, around 46% of seniors pass away with less than $10,000 in savings.
For further details, discuss your life insurance needs with a state-licensed life insurance professional of your choice.
At the very least, each person should consider getting low-cost life insurance that will cover the cost of the burial and the associated final expenses. With insurance coverage, such expenses frequently fall on the relative’s shoulders upon your death.
Basic life insurance, such as Term Life and Final Expense, with a death benefit coverage of $10,000-$50,000 primarily serves one main function:
You want your family and loved ones to be free of your final expenses like funeral burial costs and even left-over medical expenses. It is no surprise that many Texans do not like the topic of death and that it is rightfully so because it is not a happy subject to discuss. However, nothing in life is certain, except for death. Death can come from anywhere and at any moment. This is why basic life insurance is the essential level of preparation of your family, for when (not if) you pass away. With the rising prices of funeral and medical costs, Term or Final Expense type policy can be good options for Seniors who are unable to obtain permanent coverage due to affordability or a history of health issues.
When you die, your estate inherits the debts you have incurred and with a final expense insurance policy, you can provide your family with the funds to either pay off the debt fully or aid in making the payments. In addition to this, final expense coverage also provides funds for your family to settle possible accrued estate taxes, instead of selling off your inherited assets.
1 out of 2 seniors in the U.S. pass away with savings of less than $10,000. As a result, the family is frequently concentrating on trying to come up with the money for the funeral, instead of properly grieving the loss and celebrating the life achievements of the nearly departed. For instance, Texas, where the average life expectancy is around 79.2 years old, seniors (aged 65 or older) in 2022 represented approximately 13% of the state’s population. That means that the families of around 2,00,000 elderly Texans might have to fund their funerals largely out of pocket.
Final expense type insurance policies allow you to leave your family memories, not bills!
Funerals can cost a lot of money; however, your loved ones can celebrate your legacy without risking a financial burden with the help of the final expenses or term life insurance. In Texas, the average cost of funeral costs among counties is about $6,200, while the higher-end average funeral cost you may experience across the state is approximately $10,000. The cost of funerals varies drastically. For example, a resident of Kennedy County on the Gulf coast needs less than $4,000 to settle the funeral costs, while 400 miles away in Polk County, your family needs to spend almost $11,000 on a basic funeral alone. (Check your county for additional information)
Once you decide to protect your family from the financial burden upon your death, you now have to decide what type of life insurance policy you need. Most Texas final expense type policies have the payout between $10,000 and $25,000, which is usually enough to cover most funeral costs.
There are a lot of options in coverage. Different types of policies exist to achieve varying goals for different needs and costs. If you are looking for the basic final expense coverage, your options (in order of cost increase) are:
All three plans have a death benefit, although the insurance provider offers a comparatively low death benefit under final expense policies. However, it is enough to provide coverage when looking to pay funeral costs. The best way to prepare your loved ones for your death is to have a robust plan set in place by combining a life insurance policy with enough coverage to afford your funeral and additional expenses. To choose from the different life insurance options, you may want to consult with a state-licensed agent who can help distinguish the best choice for your circumstances.
If you are interested in not just covering the costs of funeral expenses, but you want to use the life insurance to create a substantial inheritance or use the cash values to fund a tax-free retirement, you should contact a Texas-licensed life insurance professional to discuss the possible options and costs to see what life insurance type fits your needs best.
Term Life Insurance - the most cost-effective option, and the most common type of life insurance. Term means Temporary, because the policy has an expiration date. Term life insurance is affordable and can be used as temporary coverage when you're shopping for permanent coverage or if you can’t yet afford permanent (Whole) life insurance.
Term life policy is usually advisable for young families with children or young couples buying a house. This way, if any of the insured parents happens to pass away, the rest of the family and the house are covered financially. Term life insurance coverage provides pure protection, which means that it pays out the exact amount of Death Benefit that was agreed upon in the contract. As temporary coverage with an expiration date, Term life insurance usually runs for 5 to 30 years, and eventually you may want to convert your term policy to a whole policy or purchase a new life insurance policy altogether. The premium for Term life policy does not change for the duration of the policy; however, when you renew, the insurance provider re-assesses the premium cost based on the most current information (age, health, etc.).
Final Expense Life Insurance (FE) - is a Permanent (does not expire) insurance type with a primary purpose to unburden your family when you die. If you’re closer to retirement and don't have a standard life insurance policy, you can opt for the final expense life insurance policy. When purchasing a Final Expense (FE) insurance plan, you can choose between:
(Read more below about how Life Insurance in Texas may cover not just the final expenses, but also give you an opportunity to use the policy as tax-free Living Benefits and/or create the inheritance for your loved ones).
The rest of insurance is purchased on as-needed basic. For example:
When discussing insurance, always speak with licensed and actively practicing agents who are well-connected in your desired type of insurance.