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The Most Important Insurance in Texas

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:

  1. What are you trying to accomplish by getting insurance? You need to clearly understand what you need to insure.

  2. What options of insurance products are available on your local market that can provide the coverage you seek?

  3. Understand all exclusions and possible options (riders) of the policy.

  4. Understand the costs of your coverage and how they may adjust overtime.

  5. The best way to navigate the insurance market is by seeking advice from a Texas-licensed insurance agent or a broker with a large portfolio of options to choose from.

According to the Hierarchy of Insurance Needs, Health Insurance is the most important insurance for everyone.

The Most Important Insurance in Texas:

HEALTH INSURANCE

Why Do you Need Health Insurance?

The 3 top reasons why health insurance is the most important insurance for every Texan:

  • Health insurance fills the basic human need of safety, by providing security and peace of mind to the insured. If you have an active health insurance policy, you know that if something happens to you, you will be taken care of.

  • Health insurance protects you and your family from financial hardships associated with expected and unexpected medical expenses. Just by having a current health insurance policy, you are guaranteed a pre-negotiated (usually much lower) price for services at any in-network facility. Even if the service itself might not be covered by the policy for some reason, your cash payment to the service provider will still be lower than if you had walked in without any health coverage at all.

  • Health insurance encourages you to take better care of yourself and your family members. Some health insurance even gives you and your family access to a variety of preventive care and early intervention services, to keep you from getting sick and requiring extensive medical treatments in the future.

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 Need Health Insurance When:

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 works 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.

The 2nd Most-Important Insurance

PROPERTY AND LIABILITY Insurance: Personal and Business

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 it's 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

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.

Why is Auto Insurance Important in Texas?

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:

  • Offers financial protection to the owner of the vehicle

  • Compensates someone else for an accident caused by you.

  • Helps protect your passengers.

  • Helps pay your legal fees

  • Compensates you for an accident caused by someone else

  • Helps with fixing or replacing your damaged vehicles

  • Offers coverage to protect your auto lender.

You Need Car Insurance if:
  • 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.

HOME INSURANCE

In Texas, home insurance is a necessity for homeowners and renters alike. Having a home 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.

Homeowners Insurance

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:

  • Damage to the exterior of the property

  • Damage to the interior of the property

  • Bodily injury to another resulting from an accident on the property

  • Damage or loss of personal belongings or assets.

You Need Homeowners Insurance if:
  • You own a home: Your home is usually one of your greatest assets and you should safeguard it. Homeowners insurance protects the structure of your property and personal belongings, along with providing you liability coverage for injuries that someone may sustain on your property.

  • You are in the process of buying a home: if you plan to use a mortgage to finance your house purchase in Texas, you are required to get homeowners insurance. Homeowners insurance is necessary for getting a mortgage as lenders use it to protect their investment. If you lose homeowners insurance coverage with an unpaid mortgage, the lender usually purchases coverage through their own means (and usually higher costs) and bills the mortgagor (you) for it.

Renters Insurance

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:

  • Damage or loss of personal property.

  • Personal liability wherein a non-resident sustains injury in your home. It also covers any legal cost if the victim decides to sue.

  • Loss of property use resulting from damages. The insurer pays additional living expenses if the damage necessitates you to vacate your residence.

You Need Renters Insurance if:
  • Landlord requirement: Some landlords and property management companies require that you have an active renters insurance while renting a home.

  • Peace of mind: Even if renters insurance is not required by a landlord, it is a useful and frequently inexpensive way (usually under $200 per year) to provide coverage to your belongings, and give you peace of mind.

Condo Insurance

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:

  • Building properties of the condo including the structure, walls, and fixtures.

  • Personal liability including both legal and medical fees from claims/lawsuits that may arise when you are at fault

  • Personal properties such as movable objects in the condo -- furniture, electronic devices, etc.

  • Renovation costs when the condo becomes uninhabitable because of an incident

  • Association assessment costs involving a claim, provided the condo unit itself is not involved in the claim

You Need Condo Insurance if:
  • You own a condo: Having a condo insurance provides financial relief by reducing out-of-pocket costs that may arise when the unexpected structure and property damage, as well as certain liabilities occur.

  • If you intend to pay the mortgage on your condo: Before approval of a condominium mortgage loan, the borrower must have an active condo insurance. This insurance protects the lender's interest.

Landlord Insurance

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.

You Need Landlord Insurance if:
  • Bank-required: Most banks that finance rental properties require this coverage as a condition of the mortgage.

  • Peace of mind: Even if the property is paid off and there is no legal requirement to have landlord insurance, it is a type of policy that anyone who lets others live at their property should have.

COMMERCIAL INSURANCE

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:

  • It provides risk coverages for losses, litigation and accidents.

  • It increases the credibility of the business.

  • It is required for most contracts.

  • It stabilizes the business financially.

  • It is a surety against bankruptcy.

Commercial insurance in Texas works in two major ways:

  • Property coverage protects business property in case of damage and the need to rebuild. This can apply to both physical and virtual business assets.

  • Liability coverage protects your business from financial losses that may result from third-party claims. Such claims could result from injuries or damages sustained by others, for whom you or those working for you are responsible.

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.

You Need Business Insurance if:
  • You own a business: having business insurance is necessary for any business as it helps to reduce business risk.

  • You own a commercial property: business insurance is a must-have for enterprises with physical storefronts or offices.

  • Have employees: employees may incur liabilities while carrying out work-related activities. (NOTE: Unlike other states, Texas does not require employers to get worker's compensation coverage).

Another type of important business coverage is Life insurance. Life insurance is frequently used by businesses to:

  • Offer life insurance to the employees as a part of the employee benefits package

  • Mitigate the risk in case if a key employee passes away and the business must react to it by hiring and training a qualified replacement.

  • Manage partnership buyouts, in case if a partner in a business pases away and the surviving spouse receives the money from the policy as part of the company restructuring process.

  • And many others. (Contact a state-licensed life insurance professional of your choice to discuss your options)

3rd Most-Important Insurance - Life Insurance:

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:

  1. While the insured is alive - Living benefits

  2. Death benefits - after the death of the insured

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:

a. Basic Life Insurance

b. Financial Security (or Legacy) Life Insurance

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.

LIFE INSURANCE

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:

  1. Payment of your final expenses

  2. Financial security for dependents

  3. Education planning for children

  4. Business planning

  5. Diversification of investment

  6. Leaving a legacy through inheritance or donation

  7. Tax-free retirement income

  8. Debt repayment strategy

  9. Use of cash value for living benefits

  10. Cushion for high estate taxes

Approximately half of Americans have life insurance coverage. Meanwhile, around 46% of seniors pass away with less than $10,000 in savings.

You Need Life Insurance if:
  • You have dependents: Having life insurance can significantly minimize the burdens of planning a funeral on your loved ones. With the compensation (death benefit) that insurers pay, the beneficiaries can take care of funeral costs, taxes, and medical bills.

  • You own a business: Life insurance is a vital part of business planning. It protects business obligations and can provide coverage for partners to fund the buyout of a portion of a business in the event of death.

  • You want to leave a legacy: One of the ways to leave a legacy for your children and other loved ones is to buy a life insurance policy. The death of a person may cause untold hardship to their dependents. However, a life insurance policy cushions the effect the insured's demise could have on dependants and provides some financial security. Additionally, death benefit (compensation) paid by insurers for a life insurance policy in Texas is tax-free, so beneficiaries don't have to worry about paying high taxes on such inheritance.

  • You want to diversify your investment: Life insurance policies have proven invaluable in helping the policyholders diversify income, especially using the universal life policies, such as IUL (Indexed Universal Life). IUL insurers tie these policies to different investment indexes in the market and then, unlike the 401Ks, guarantee that your investments will not lose money, even if the underlying index does. Policyholders are paid dividends as the value of the investment products appreciates over time. If the index loses money - your savings remains unchanged, without the dip into the negative.

  • You want to save towards retirement: As a tool for retirement planning, life insurance offers a means for the insured to accumulate stable, secured, guaranteed, regular, and tax-free income through the retirement years. In the long run, most of the reinvestment risks associated with life investment policies are borne by the insurer.

  • You want to be able to use the death benefit as a living benefit.

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 to Cover Final Expenses and Burial

Why Do I Need Basic Life Insurance Policy for Final Expenses?

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:

  • It pays for your final expenses, such as a funeral and the final medical bills you might leave behind. In some cases it offsets back taxes you owe, which must be paid before your beneficiaries can take possession of your inheritance.
You Need Basic Life Insurance When:

You want your family and loved ones to be free of 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!

Cost of End of Life Expenses in Texas

Average Cost of Funeral in Texas

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 $6,000, 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.

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:

  • Term Life,

  • Final Expense Simplified issue,

  • Final Expense Guaranteed Issue.

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.

The Two Most Common Options for Basic Life Insurance Coverage in Texas are:

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-assess 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:

  • Guaranteed Issue - which "almost" guarantees that you can get it. (In rare cases of extremely high risk, the insurer may still choose to exercise their right to deny coverage.) Due to the higher level of risk that the insurer takes on, Guaranteed issue life insurance policies in Texas usually offer coverage of $5,000 to $25,000 and the coverage is usually the most expensive among all FE-type plans. Guaranteed Issue life insurance may cost more than double of the Simplified Issue, and close to triple of the Term Life policy with similar benefits.

  • Simplified Issue - usually requires answering a detailed medical questionnaire but you do not have to undergo an extensive medical examination. This is what "simplified issue" means, as compared to Guaranteed. Since the risk of the "unknown conditions" that the insurer is taking on is lower - Simplified Issue Final Expense policies usually cost less than "Guaranteed" and offer higher coverage. Simplified FE can be usually purchased with coverage of $10,000 to $50,000, at a cost of approximately 50% of Guaranteed FE.