The Most Important Insurance in New York
While many types of insurance exist in New York, it is best to identify the most vital ones to avoid spending more money than you should on insurance coverage. According to the Hierarchy of Insurance Needs, health Insurance is the most important insurance for everyone, and New York residents are not left out. Other crucial insurance coverages in the state are property and liability insurance and life insurance. Property and liability insurance products include auto, residential, commercial, and disaster insurance. The most common life insurance products are term life, final expense (FE), and indexed universal life (IUL) insurance. Typically, your situation and needs will inform the type and amount of insurance you should get.
The New York State Department of Financial Services (DFS) regulates the insurance business in New York. If you intend to purchase any of these vital insurance coverages, speak to a New York-licensed insurance agent.
The Most Important Insurance in New York:
HEALTH INSURANCE
In New York, health insurance is a form of insurance that pays for health care and medical bills, and it typically covers treatment for severe illnesses, routine care, and emergency care. It is a contract between a health insurance company and the insured that requires the insurer to pay some or all of the insured's medical bills in exchange for a premium. Health insurers in New York pay medical bills in two ways. They either pay an insured's medical care provider directly or reimburse an insured for medical bills incurred from treating their ailments. In 2022, an estimated 6.4 million New Yorkers who could have been uninsured have enrolled in low-cost or free health coverage through the New York State of Health. According to the United States Census Bureau, 12% or more of New Yorkers were without health insurance in 2019, while in 2021 only around 8% of adults under the age of 65 were without proper health coverage. The highest uninsured adult rate in the state of New York is in Queens County, while the lowest rate is observed in Saratoga County.
New York requires all residents to have health insurance in compliance with the Affordable Care Act and mandates health insurers to offer comprehensive coverage to every resident (non-compliance is not penalized). Health insurance plans can be broadly categorized into two, namely public insurance and private insurance. In New York, health insurance plans in the private market come in various metal tier options. These are:
Catastrophic plans
Bronze plans
Silver plans
Gold plans
Platinum plans
The catastrophic plan is a low-cost and affordable coverage option with low monthly premiums for individuals with few medical expenses. However, it offers limited coverage and is only available for people under 30 or those with hardship exemptions. A bronze plan is an affordable option for individuals over 30 years who are not eligible for a catastrophic plan. Although it costs more than a catastrophic plan, it is ideal for persons who want cheaper options with high out-of-pocket maximums. A bronze plan offers better coverage compared to a catastrophic plan.
A silver plan offers adequate health coverage with reasonable monthly premiums for an average individual in New York. People on this plan do not have to pay the high out-of-pocket expenses associated with low-cost plans or the relatively high premiums obtainable with more expensive plans. For short, the silver tier balances affordable premiums with coverage. The gold plan is best for individuals who need regular medical attention. However, it is a high-cost plan with expensive monthly premiums, hence low out-of-pocket maxes. People on this tier pay less out of their pockets for medical bills since they pay high premiums. The platinum plan is the most expensive private health insurance coverage in New York. It is best for persons who often incur high medical bills and want a plan with low out-of-pocket maximums.
Low-income earners in New York who cannot afford any of the private plans sold on the state's Health Marketplace are usually eligible for public health insurance. While the state has many health insurance programs, the most common ones are:
Child Health Plus (CHIP)
Medicare is a federally-sponsored health insurance program for persons at least 65 years of age and people who are younger but with disabilities. Individuals with permanent kidney failure needing a transplant or dialysis, commonly known as End-Stage Renal Disease (ESRD), are also eligible for Medicare in New York. Medicare covers the following:
The cost of prescription drugs, which may include vaccines or shots as recommended by physicians
Inpatient hospital stays in hospice care, skilled nursing facilities, and some home health care
Outpatient care, preventive services, medical supplies, and certain physicians' services
Medicaid is another government-sponsored program that offers low-income earners comprehensive health insurance coverage. According to the New York State Department of Health, as of 2021, over 7.3 million low-income New Yorkers enjoyed comprehensive health coverage under the state's Medicaid program. As of 2022, the New York Medicaid program recorded over 7.4 million participants' enrollment. The program uses an extensive network of health care providers to provide its services and pays for such services.
The Child Health Plus (CHIP) is a health insurance plan for every child under age 19 who does not have health insurance in New York. It offers comprehensive health coverage and covers prescription drugs, hospital stays, physician visits, and outpatient care. As of 2022, New York has had over 577,000 CHIP enrollment.
Why Do you Need Health Insurance?
In New York, you need health insurance because it can help you manage your health care needs and reduce your medical payments. Out of the nearly 20 million residents, over 1.2 million of adults under the age of 65 are uninsured or do not have enough coverage to satisfy the average health insurance needs. In other words, health insurance provides the care you need at an affordable price, especially considering the increasingly high medical costs. In New York, long-term care is expensive. Depending on location, nursing home care costs between $260 and $390 daily. Most health insurance companies work with a network of healthcare facilities, hospitals, specialists, and doctors that can offer you lower rates for medical treatments than those outside the health plan's network. With health insurance, you do not have to pay the total cost for all your medical care. It also covers all the care that your family members and other dependants receive.
Besides encouraging preventive care, if you have health insurance in New York, you will become conscious of seeing your physician for regular medical check-ups. Such check-ups can help you identify health issues early before they deteriorate, and thankfully, most health insurance plans cover certain in-network preventive care. You also need health insurance coverage in New York to protect your savings. Without health coverage, the cost of medical bills for unforeseen illnesses could drain your life savings. In such situations, a suitable health insurance policy will cover such expenses without taking a dime from your savings, and you can use those savings for their intended purposes.
While the need for health insurance coverage in New York cannot be overemphasized, you must understand that you will have to pay premiums to buy a policy and keep it active. So, it is advised that you get coverage that offers the maximum options with an affordable premium. Discuss your medical needs with a New York-licenced health insurance agent before purchasing a health policy. A knowledgeable agent will evaluate such needs and leverage their relationship with reliable health insurers to find you cost-effective yet comprehensive health coverage.
The 2nd Most-Important Insurance
PROPERTY and LIABILITY Insurance: Personal and Business
Property and liability insurance in New York combines two forms of coverage to protect an insured or their business. The property part protects you financially if your property is damaged or lost, while the liability side covers you if you are liable for a third-party injury or another person's property damage. A business can purchase property and liability insurance for the same reasons an individual would. While an individual needs it to protect their personal assets from damage or as a safety net against third-party liability claims, a business uses it to protect its commercial assets against physical damage or loss.
Technically, property coverage and liability coverage are two different types of insurance. However, no insurance company in New York sells them separately as most policies bundle them together. Personal property coverage for an individual includes items like their clothing, car, house, electronics, and furniture, while it covers inventory, fixtures, furniture, supplies, and office equipment for a business.
Liability coverage is the part that covers instances where a third party slips and falls on your home premises or a business premises. It will pay for medical expenses incurred from the injuries sustained and legal fees if the third party takes the insured person or business to court. If a business causes damage to or is liable for the loss of use of another person's property, liability coverage will pay for the value of the damage or the loss of use of such property.
Property coverage in New York can either be a replacement cost value (RCV) or actual cash value (ACV). Generally, RCV policies provide more coverage than ACV policies. Hence, they are often more expensive than ACV coverage.
Replacement Cost Value - This coverage pays an insured person or business based on the amount it would cost to repair, replace or rebuild their property. It does not take wear and tear or depreciation into consideration. Although a replacement cost policy requires that you pay higher premiums, it can help you or your business to recover quickly from losses or damages
Actual Cash Value - This coverage takes depreciation and wears and tears into consideration when compensating an insured person or business for a property loss or damage. It only pays the current estimated value of a property, subject to a policy's coverage limits and deductibles. For instance, if a Television you purchased for $1,200 three years ago is destroyed in a house fire, ACV coverage will not likely pay you the total cost. It will reimburse the current estimated value of the Television minus your deductible. If the Television is valued at $1,000 and your deductible is $400, your insurer will pay you $600, and you will have to pay the balance from your pocket.
In New York, several insurance policies (personal and business) are under the property and liability umbrella. These include auto, residential, commercial, and disaster insurance. Each of these insurance policies includes property and liability coverage.
AUTO INSURANCE
Auto insurance is a type of insurance that protects an insured person or business for damage to or loss of their vehicle. It also covers damage to third-party property and death or bodily injuries to a third-party caused while an insured uses their car. An auto insurance policy in New York is like financial protection for owning a vehicle. It can cover the cost of damage to an insured's car, medical bills, and the other driver's vehicle in the case of an accident. Auto insurance also covers a vehicle if it is stolen or damaged in other ways besides getting involved in an accident.
Using your car for work-related errands in New York is not advisable as personal auto insurance will not cover you if you get involved in an accident. Sole proprietors, whose businesses are almost inseparable from their personal lives, can purchase hired and non-hired auto insurance (HNOA) for coverage against accidents in private or rented vehicles used for work-specific activities.
In New York, an auto insurance policy comprises a mix of coverages, each performing different functions. These include:
Collision Coverage - This covers the costs of repairing an at-fault insured's vehicle after an accident and is recommended for persons or businesses that cannot afford to replace their cars out-of-pocket. It is also the ideal coverage for individuals or businesses that bought their vehicles with loans
Liability Coverage - This coverage protects an insured when they damage someone's property or hurt someone in an accident in which they are at fault. It includes property damage liability and bodily injury liability. Everyone and businesses that use a vehicle in New York need auto liability coverage. The state's minimum liability coverage is:
$10,000 for property damage for a single accident
$25,000 for bodily injury and $50,000 for death for an individual involved in an accident
$50,000 for bodily injury and $100,000 for death for at least two people in an accident
Personal Injury Protection (PIP) Coverage - This covers an insured's medical costs and other passengers in a car when injured in a vehicle accident, whether at fault or not
Comprehensive Coverage - This coverage pays an insured the replacement or repair costs of their vehicle when vandalized, stolen, or damaged by falling objects or in a natural disaster
Uninsured/Underinsured Motorist (UM/UIM) Coverage - This coverage pays an insured their medical and vehicle repair costs if involved in a car accident where the at-fault driver has no insurance
Bobtail Coverage - This is recommended for businesses using semi trucks without an attached trailer. It provides coverage for an insured vehicle, even for non-work-related issues
Loading and Unloading Coverage - This coverage protects a business's supplies and equipment against damage during loading, unloading, and transport
Towing and Labor Coverage - This coverage pays the cost of roadside help gotten for business-owned vehicles.
Why Do you Need Auto Insurance in New York?
In New York, you need auto insurance because state law requires that a driver have the minimum amount of auto liability coverage, which also applies to vehicles used for commercial purposes. Besides, no individual or company can register a car in New York without a state-issued auto liability insurance coverage, which is always an integral part of an auto insurance policy. Else, the state's Department of Motor Vehicle (DMV) may suspend the driver's license and the car's registration. In 2018, New York State had almost 11.4 million registered vehicles, which grew to an estimated 11.6 million by 2022. Anyone caught driving without car insurance also risks paying a fine between $150 and $1,500 and could even face up to 15 days of jail time.
According to the New York State Department of Motor Vehicles (DMV-NY) and the Institute for Traffic Safety Management and Research (ITSMR), between 2018 and 2022 there were over 1.7 million crashes in New York State: with at least 4,092 of them fatal.
Other reasons an individual or business needs auto insurance in New York include:
Payments for injuries sustained by passengers in the event of a car accident
Payments for repair or replacement costs of another person's car or property if at fault in a car accident
Payments for damages to a vehicle caused by weather events such as wildfires, ice storms, and hail
Supplementing health insurance as it could pay for medical bills that regular health insurance may not cover. Between 2012 and 2014, car crashes were responsible for an annual 12,093 hospitalizations among New Yorkers
Protecting the owner or the business that uses a car from financial complications in the case of a car accident
Provision of coverage for other people using a car (an insured vehicle), especially where the policy owner is not the only one using the car (auto insurance typically applies to an insured car, and it covers whoever the driver is).
RESIDENTIAL INSURANCE
Residential insurance is the type of insurance that provides a person financial protection in the event of unexpected damage or destruction to their home and personal possessions. Depending on home ownership status in New York, residential insurance is available to homeowners (those who live in their house), renters, and landlords (those who rent out their properties). As of 2021, New York had an estimated 19.8 million residents with about 8.5 million housing units. An estimated 54% of these units are owner-occupied while the rest are rented. Also known as home insurance, residential insurance offers an insured the following forms of protection:
Damage to Residential Property - It covers damages to a home up to a policy's coverage limits
Personal Possessions - It covers loss of or damage to personal property (the contents in the home)
Other Structures - Residential insurance covers damage to other structures detached from the main dwelling of a home
Medical Expenses - It covers the cost of medical bills for injuries occurring to a third party on an insured's property by the insured, their pets, or family members
Additional Living Expenses -Residential insurance covers an insured's living expenses, although subject to the limits of the coverage if a home becomes uninhabitable due to a covered loss and the resident needs to find a temporary accommodation
Personal Liability - It protects an insured property owner against claims originating from accidents to other individuals on their property
The most common types of residential insurance in New York include homeowners, renters, condo, and landlord insurance. If you are looking to purchase residential insurance in New York, discuss your options with a licensed and experienced P&C insurance agent in the state. They are well-grounded in the insurance industry and are better positioned to find you a home policy best tailored to your needs. Protect your home and ask your friendly insurance agent to assess the coverage needs on an annual basis.
HOMEOWNERS INSURANCE
Homeowners insurance is a type of residential policy that protects homeowners from financial complications arising from unexpected home damage. It pays for damages caused by events covered in an insured's policy. Nearly 12% of all property and casualty insurance purchased in New York every year is on home residence coverage. About 54% of the over 8+ million housing units in New York are owner-occupied. Most homeowners insurance policies in New York cover additional living expenses, home structure, and personal possessions. It also offers liability protection.
While it is not legally mandatory in New York, there is a probability that your lender will require you to have it if you have a mortgage. Even if you do not have a mortgage, it is ideal to have homeowners insurance so you do not end up paying repair or rebuild costs out of your pocket if your home is damaged or destroyed by an insurable peril. The eight forms of homeowners insurance are categorized as HO-1 through HO-8, and each provides a different type/level of coverage. The maximum amount a homeowners policy will pay an insured depends on their policy coverage limits, while bearing deductible in mind, if applicable.
Why Do you Need Homeowners Insurance in New York?
In New York, you need homeowners insurance because it can:
Pay for the medical bills incurred from treating other people who sustain injuries on your property
Reimburse you for the value of your lost or damaged personal possessions. Such items do not have to be in your house in the event of a covered peril, for your homeowners policy can cover them
Satisfy your mortgage lender interests if you have a mortgage on your home
Can pay for the repairs of your home or adjoining structure in the event of certain natural disasters such as hurricanes, fires, and tornadoes. This is known as dwelling coverage. However, some natural disasters such as flooding and earth earthquakes are not covered by homeowners insurance and require special policies
Provide coverage for your personal possessions against theft and vandalism
Can pay your living expenses if you need to relocate somewhere else temporarily if your home is destroyed and requires repairs. This is also known as loss of use coverage
Can protect you against lawsuits if someone gets injured or their property is damaged while on your property. Besides paying their medical bills and repairing their damaged items, your homeowners policy will pay an attorney fee to defend you if such an injury or property damage leads to a court case
If you need to get a homeowner’s insurance or have homeowners insurance questions, your best option is to engage the services of a New York-licensed P&C agent. Professional agents (independent agents) have a network of reliable insurance companies. They will leverage such relationships to get you a suitable and affordable homeowners insurance policy in New York.
RENTERS INSURANCE
Renters insurance is a type of property insurance that protects your personal belongings in a rented or leased apartment or house from unforeseen circumstances and protects you from liability claims. In New York, it covers damage or loss related to perils such as vandalism, fire, plumbing issues, theft, hail, windstorm, lightning, and fire. The three main types of protection a renters insurance policy provides are liability, additional living expenses, and personal possessions. Tenants of nearly 4 million rental residential units across New York can benefit from this coverage. Statewide, Hamilton County has the highest homeownership rate, with just 13% of homes for rent, while The Bronx is the state leader with the highest percentage of its real estate for rent.
Although renters insurance covers personal belongings in a rented property, homeowners insurance in New York excludes coverage for valuables like expensive jewelry. You may need to get extra coverage for your expensive collectibles. Also, renters insurance does not cover any item used for work or business purposes if you operate a small business or work out of your home.
Why Do you Need Renters Insurance in New York?
You need renters insurance in New York because of the following reasons:
Your landlord's insurance will not protect your personal belongings. Landlord insurance only covers the physical structure in which you reside as a tenant. On the other hand, renters insurance provides coverage for your personal belongings such as laptops, TVs, smartphones, clothes, furniture, and electronic gadgets
Your landlord may require that you have it before renting out their investment property to you
It can provide liability coverage if someone sustains bodily injury in your rented apartment. For instance, if your dog bites someone or the person trips and falls inside your rented home, your renters insurance policy can cover their medical bills or court costs if such person sues you
It covers the personal belongings with you while you travel
It provides coverage for additional living expenses if your rented apartment is damaged and becomes uninhabitable while repairs are ongoing and you need to find a temporary accommodation
Generally, renters insurance is affordable in the U.S., including New York. You should consult with a licensed P&C insurance agent before purchasing renters insurance in the state. A knowledgeable agent will assess your insurance needs and assist you in selecting a suitable rental policy from a reliable home insurance company. They will also help you with the entire application process, and you do not have to pay them for such services.
CONDO INSURANCE
Condo insurance in New York is a form of property insurance that protects the interior of a condominium unit and the personal possessions within the unit against perils such as fire, theft, water damage, and vandalism. The condo building itself is insured by the condo association through the master insurance policy (also known as Condo Association Insurance).
A condo is a privately-owned or rented individual unit within a residential or housing complex, and like a regular standalone home, a condominium has some unique insurance needs. Generally, condo insurance excludes damages related to sinkholes and earthquakes. Condo insurance also does not cover flooding. You may be required to purchase separate coverage for these natural disasters if you live in regions prone to them.
Why Do you Need Condo Insurance in New York?
You need condo insurance in New York because if you have a mortgage on your condominium unit, your lender will require it. While it is not legally mandatory, you also need condo insurance in New York for the following reasons:
The condo association's master insurance policy which covers the condominium complex and the common areas in the building, will not provide coverage for the interior of your unit. Only a condo insurance policy can cover the contents of your condominium, such as clothes, shoes, furniture, and computers
It provides additional living expenses for temporary accommodation and feeding while your condo unit is being repaired following damage from an insured event that renders it uninhabitable
It can cover the renovations or upgrades made to the interior of your condominium unit if you inform your insurer before an insured peril occurs. Such upgrades may include renovating your floor, replacing your cabinets with better ones, and remodeling your inner walls
It covers third-party liability issues such as if someone slips and falls in your bathroom and sustains an injury or if you or a member of your family damages a neighbor's property
If you deem it necessary to obtain condo insurance in New York, seek the services of a licensed property insurance agent who can evaluate your needs and help you find suitable and affordable coverage.
LANDLORD INSURANCE
Landlord insurance in New York is a form of property insurance that covers the required repair or replacement costs in the event of unexpected circumstances that damage a rental home or in case of a liability claim from the tenants or their guests. It is designed to protect landlords who rent out the residential properties they own from financial losses arising from damage to their investments.
Why Do you Need Landlord Insurance in New York?
With over 4 million dwelling units for rent, New York landlords need landlord insurance because it can pay for repair or replacement costs for damages to the structure of your rental property and any detached structures. Typically, it covers damages or losses arising from falling objects, explosions, fire, smoke, the weight of ice or snow, accidental water damage, wind, and hail. It is worthy to state that landlord insurance does not cover theft or vandalism to a property, as well as building code upgrades. If you require coverage for these, you may need to add some optional coverages to your policy. Also, it does not cover floods and earthquakes. If you need additional coverage for these perils, you may consider purchasing special policies. For instance, you may obtain a separate flood insurance policy from the National Flood Insurance Program (NFIP) if you own a rental property in a flood zone.
You also need landlord insurance in New York because it can help you with medical bills and legal fees for personal injuries or property damage sustained by a third party if you are liable. If your rental property gets damaged to the extent that it becomes uninhabitable for your tenants, landlord insurance can help cover rental earnings for the period of repairs. This is known as loss of rental income coverage. A landlord insurance policy in New York will also cover damages done by a tenant.
Paying out of pocket for repairs or replacement of your rental property can strain you financially, hence, the need for a landlord insurance policy. To get one in New York, discuss your needs with a licensed and knowledgeable property insurance agent who will assess those needs and help you determine a suitable plan. They can also determine how much coverage is required for your rental property to avoid over-insuring it.
COMMERCIAL INSURANCE
Commercial insurance in New York comprises nearly 59% of all property and casualty coverage purchased in the state. Generally, commercial insurance protects a business against risks that could affect its operations. It is also known as business insurance and broadly provides liability and property coverage. In New York, commercial insurance protects a business against financial losses from risks such as client or employee injuries, customer lawsuits, and property damage or theft. According to the United States Census Bureau, as of 2021 New York State had over 537,369 businesses with over 8.6 million employees - all with their individual insurance needs.
Depending on the type of business, the following are 10 of the common types of commercial insurance in New York:
General Liability Insurance - Provides protection against third-party property damage and bodily injury on business premises. It also covers advertising injury
Commercial Property Insurance - Covers a business's physical assets like their building, equipment, and furniture
Business Owners Policy (BOP) - This combines liability and property coverage and covers a wide range of risks
Workers' Compensation Insurance - Covers a business's employees for work-related illnesses and injuries. This is legally mandated for every business that has employees in New York
Commercial Auto Insurance - Covers physical damage and provides liability coverage for a business's vehicles
Cyber Liability Insurance - Protects a business engaging in data storage or management against cyber attacks and data breaches
Professional Liability Insurance - Also known as errors and omissions (E&O) insurance, it protects businesses that provide professional services like accounting or consultation from claims relating to professional negligence and pays defense costs
Commercial Crime Insurance - Covers crime-related losses such as theft
Business Interruption Insurance - Covers for the period when external forces a business to close temporarily and pays for lost income during such a period
Employment Practices Liability Insurance - Covers the business if the employee files a suit for such acts as: wrongful termination, ago or race disctimination, sexual harassment.
Why Do you Need Commercial Insurance in New York?
Businesses in New York need commercial insurance because:
It can help pay the repair or replacement costs to the business assets and property
It can replace the lost income in the event that a covered peril forces the business to shut down their business premises temporarily
It can help to pay costly legal bills arising from a third-party bodily injury on the business property or if the product manufactured by the insured business hurts someone and the person decides to sue
It can facilitate the leasing of commercial space as most landlords, especially in commercial retail require evidence of insurance before renting out space for commercial purposes
As a business owner in New York who is confused about the right commercial insurance policy for your business, your best option is to engage the services of a professional and licensed commercial insurance agent. An agent will consider your business type and structure and evaluate the business needs to determine the commercial insurance coverage best tailored to it. They can also assist you with the application process from start to finish.
DISASTER INSURANCE
Although disaster insurance is not exactly a type of insurance policy, a typical homeowners policy does not cover homes from some disasters. For instance, only disaster insurance can protect a home or business against natural disasters like floods, earthquakes, and hurricanes and man-made disasters like terrorist attacks or riots. Disaster insurance provides coverage for unpredictable disasters (natural or human-made) that can damage a home or business. In New York, you will likely need to purchase individual policies specific to the disaster you intend to cover, such as floods, hurricanes, and earthquakes.
According to the Insurance Information Institute (III), New York is one of the top 10 states in the United States regularly hit by hurricanes, making it imperative for homeowners to carry coverage for hurricanes, especially for the property owners in close proximity to the coast. For instance, between September 1, 2021 and September 3, 2021, New York was hit by Hurricane IDA, which affected 1,802 residential properties. The reconstruction cost of a single-family home destroyed by a hurricane in the state ranges between $30,000 and $196,000, expenses the right disaster coverage will cover. The National Flood Insurance Program (NFIP) offers flood insurance to businesses and homeowners in New York, and at least 1,466 communities in the state are participating in this program.
You need disaster insurance in New York because certain natural disasters are not covered by your homeowners, renters, or landlord policy. Without disaster insurance as the additional protection for the specific type of disaster common in your area, you may have no option but to bear the costs of repairing or replacing your properties when such events occur. Depending on the type of disaster you regularly experience in your county, purchasing a separate policy can mitigate rebuilding costs and expensive repairs. Do not get caught without proper coverage when the disaster strikes. Stay prepared.
To stay safe and covered from unexpected disasters in New York, engage the services of a licensed agent to review your existing policy for the type of coverage they provide on your building and personal belongings. If the policy excludes coverage for the types of damage you may experience from a common disaster in your region, like a flood or a hurricane, make sure to get it either as a rider or a separate policy.
3rd Most-Important Insurance - Life Insurance:
LIFE INSURANCE
Life insurance in New York is the type of insurance that provides financial protection for your family after you die. It is a contract that guarantees the payment of a sum of money, also known as a death benefit, by your insurer to named beneficiaries after you pass away. You can get life insurance in New York anytime you deem fit, as long as you can qualify for coverage. However, it is advisable to obtain it when you are young as this could help you save on premium costs, depending on the type of policy you purchase. Life insurance should be a priority if you have people who depend on you financially or if you have debt that must be taken care of in case you suddenly pass away. It can provide your dependents with enough money to replace your income after your demise. Alternatively, life insurance is purchased as an investment tool, to help navigate the times of retirement and to save money on taxes.
Why Do you Need Life Insurance in New York?
You need life insurance in New York because:
It can help you leave an inheritance for your loved ones, especially if you do not have assets to pass on to them after you die
It can replace your income after you pass away and protect your family, especially if you left young children behind who would find sustaining their standard of living challenging when you are no longer there
It can help your loved ones pay off your outstanding debts, such as car loans, mortgages, and credit cards
It can pay for expenses such as your final medical bills and funeral costs when you die, relieving your loved ones from the stress of having to pay such costs out of their pockets
It can serve as additional financial security for your children. For instance, it may provide take-off funds for them when they are starting a business or getting married
It can provide you with supplemental retirement savings, depending on the type of life insurance you have
It can protect your business and keep it running if you die unexpectedly, depending on the type of life insurance. Business partners typically use life insurance to finance Buy-Sell agreements.
Before purchasing a life insurance policy in New York at any point in your life, you should determine the kind of financial protection you need. To help you decide, discuss such needs with a New York-licensed life insurance agent who can help with the assessment of needs and to find a suitable and affordable life policy that matches them.
Basic Life Insurance to Cover Final Expenses and Burial
The basic life insurance that covers end-of-life expenses in New York is known as final expense (FE) insurance. It is sometimes referred to as burial insurance.
Why Do I Need a Basic Life Insurance Policy for Final Expenses?
With 46% of Americans dying with savings of less than $10,000, over 1.5 million New York senior residents could be placing the unnecessary and frequently unbearable financial burden on family and friends. While grieving their loss, not only does the family need to plan the funeral, but quite frequently it also needs to pay for it too. The average costs of a basic funeral in New York in 2022 was around $6,500.
You need a basic life insurance policy for final expenses in New York because:
It provides your loved ones with immediate funds for final expenses such as final medical expenses and funeral costs
It can provide your dependents financial support after you pass away
It allows you to plan your funeral ahead of your demise.
You need basic life insurance in New York when:
You have a business or just starting one
You have young children and other dependants with financial needs
You are an adult without substantial savings from which your loved ones can draw after you pass away
You are married and provide most of the income for your immediate family.
Cost of End of Life Expenses in New York
New York ranks among the ten states with the highest end-of-life expenses in the United States. The 2022 average end-of-life cost in the state is between $19,000 and $19,200, based on location in the state and the deceased's final wishes.
Average Cost of Funeral in New York
The cost of funerals in the United States has increased steadily over the past years. In New York, the average standard funeral cost in 2022 was between $10,700 and $10,900. Items included in this cost include:
Embalming
Funeral home's basic service fee
Facilities and staff to manage viewing
Service car
Transporting deceased's remains to funeral home
Facilities and staff to manage the funeral ceremony
Vault
Hearse
Casket
Preparing the body, such as hair styling and makeup
Burial plot
Cremation fees (for deceased who wished it).
Most Common Types of Life Insurance in New York are:
- Term Life - Term life insurance in New York is designed to cover you for a specific period, and only pays out death benefits. Depending on how long you need coverage, it could be between one year and 100 years. Term life insurance ends at the specified time unless you choose to extend the term. The premium paid on this policy is usually determined by age. However, most insurance companies will not offer anyone term life insurance beyond age 70 or 80.
The premium cost for a term life policy will remain the same for an entire term. However, an insured will likely pay higher if their policy expires and they renew it. This is because they would have grown older relative to the initial purchase at the time of renewal. If you purchase a term life policy with a longer term, you will save on costs as you will only have to pay the same premium for that term length. If you selected this option during the purchase, term life can be converted to a permanent policy.
- Final Expense (FE) Life Insurance - Final expense (FE) life insurance in New York is an insurance plan that covers all expenses relating to the insured's final costs after they pass away. Such expenses usually include medical, funeral, and burial expenses. While it primarily pays out death benefits to cover final expenses, named beneficiaries of a FE life insurance policy in New York can use the benefits for other purposes. FE life insurance is particularly the right policy for old and retired individuals who do not have personal insurance policies, no longer have life insurance through their employers, and cannot qualify for lower cost policies.
Final Expense insurance can either be a guaranteed issue or a simplified issue. Guaranteed issue final expense life insurance offers lower maximum coverage amounts and is specifically designed for high-risk individuals. High-risk individuals are people with severe health conditions or older adults between 50 and 80 years. Guaranteed FE life insurance is usually more expensive than simplified issue FE life insurance. Simplified issue final expense insurance is designed for moderate-risk individuals with relatively good health who may not be eligible for conventional life insurance coverage. Persons suffering from certain terminal illnesses may not be eligible for simplified issue FE life insurance in New York.
- Indexed Universal Life (IUL) - Indexed universal life (IUL) insurance in New York is a form of universal life insurance whose cash value growth depends on the performance of a market index. Generally, universal life insurance policies come with cash value accounts that accumulate interests. However, instead of the cash value account growing on a fixed interest rate as with a regular universal life insurance policy, IUL cash value growth is tied to a market index performance. This implies that they grow when some stock market indexes perform well. Meanwhile, IUL insurance has a zero-loss guarantee, where no matter how much the underlying index may fall, the cash value account cannot drop lower than the starting amount at the beginning of the accounting period.
The death benefit of all life insurance is tax-free, implying that named beneficiaries will not have to pay income or death taxes. You can borrow money from your IUL insurance without fear of taxes while still alive, depending on the available cash, and you do not even have to repay such money. If you take out a tax-free loan against the cash values to help with your retirement income, the loan can be either repaid by you, or it can be repaid to the insured out of the death benefit, with the remaining amount distributed to the beneficiaries upon your death.
The bottom line is that life insurance is not only for after you die, but it can be a major help to you while you are still alive. To find out more about life insurance options and to get life insurance quotes in New York, speak with a knowledgeable state-licensed and experienced life insurance professional who has access to multiple insurers and coverage options for comparison.
