People are often tempted to forgo buying insurance without having the knowledge of the types of insurance to subscribe to. The premiums necessary to own these policies can be shockingly expensive, relative to one’s budget. One should never go for a package that seems to be too expensive above what is in his pocket.
There’s no single insurance policy that will cover all aspects of your life. That’s why we have different types of insurance. So, if you want to prevent major financial hardships, you’ll need various kinds of coverage or you can call it “types of insurance.”
Here are the seven most common types of insurance everyone needs:
1. Health Insurance
In recent times, health insurance has become more confusing than ever. Though, it’s essential. A major medical event could cause severe financial hardships. Sometimes, the costs are so great that people have to declare bankruptcy because they don’t have any foreseeable paths to covering their total bills.
2. Life Insurance
In considering the types of insurance that exist, life insurance is one of the most important everyone may need. However, there are a wide variety of life insurance policies. The most basic — and least expensive— is term life insurance which pays a specific amount if you die within the time frame of the policy. For example, let’s say you’ve purchased a $500,000, 20-year term policy. If you die within that 20 years, your heirs will receive $500,000, tax-free. Other policy types include “permanent” life insurance, which doesn’t lapse as long as you pay your premiums.
Life insurance is a complex subject, and each person should buy it in accordance with their needs. People with children who are minors likely need a higher amount of coverage. That way, the costs of the children’s care and upbringing will be covered in the unfortunate event of a parent’s death. Couples who are dependent on one spouse’s higher income might also need more coverage. If the higher-wage-earning spouse dies prematurely, life insurance will mitigate the loss of family income.
3. Disability Insurance
Most major corporations offer some form of disability insurance to their employees, but many smaller businesses do not. This type of coverage is intended to replace your salary if you were to become temporarily or permanently disabled.
Be aware that disability coverage, like all insurance, has a lot of significant nuances. For example, are you disabled and unable to perform any work, or are you just unable to work at your normal occupation? These definitions have a major impact on when you can receive coverage.
4. Long-Term Care Insurance
This insurance helps cover costs in the event you need to be in nursing care, either on a short- or long-term basis. You should also consider whether you have assets outside the policy that could pay for your care. If not, strong coverage may be more necessary for your family.
Unfortunately, long-term care insurance can be very expensive, but you can look into hybrid policies that cover the same events. For example, you could share a policy between spouses or find a policy attached to an annuity.
5. Homeowners And Renters Insurance
Homeowners insurance pays for partial damage or the complete destruction of your home. Often, it also covers the damaged contents of your home, as well as the funds necessary to rent accommodations while your home is being repaired.
Your home is likely the biggest purchase you will ever make, so this is a very important type of insurance to have. Be sure to look at the details, though. Will the policy cover what you paid for the home or the price of what it would take to rebuild it? These could be very different numbers.
If you are a renter, you also need coverage. Structural damage is the responsibility of your landlord, but renters insurance will protect your personal possessions.
6. Liability Insurance
Liability insurance is often attached to your homeowner’s policy, and it covers accidents that may happen at your home. For example, if a house guest slipped on your stairs, you might be responsible for their medical expenses if you were found liable for the accident. Liability coverage would mitigate those costs.
It frequently also extends to accidents involving the homeowner that takes place outside the home. For example, if your dog escaped from the yard and, is in a state of fear, but one of your neighbors, liability insurance could cover the damages.
7. Automobile Insurance
If you own a car, you are already intimately familiar with automobile insurance. That’s because it’s one of the most important kinds of coverage you can have. In 2019, around 4.4 million people were involved in car crashes serious enough to require medical attention. Even less-critical accidents like fender-benders and stationary collisions can set you back a lot for repairs. Automobile insurance pays in the event that you experience a car wreck, and it will also pay for the other party’s damages if you are at fault.