The Different Types of Insurance and What Insurance You Need

Do You Have the Insurance You Need?

Wondering what type of insurance you need?

Insurance.

It’s not an exciting topic, but it’s a necessary one.

A discussion on personal finance isn’t complete unless you’ve properly addressed the risks to your assets and income.

And insurance is typically the last frontier of personal finance.

Most people, I would think, have retirement savings and debt under control long before they tackle the subject of insurance as a whole.

But there are many different forms of insurance. It’s hard to know for sure what to do. You may be asking, “what types of insurance I need to protect myself and my family“. Below I’ll take a high level view of the various forms of insurance and provide some basic information you should know about each one.

Life Insurance

Probably the most under-purchased (is that a word?) form of insurance is life insurance. This type of insurance protects your family from the potential loss of income from your death. Not fun to think about. But it’s a reality.

When I got married and started having kids, one of the first things I started thinking about was getting life insurance. My family depends on me for my current and future income to make it. I knew I had a small bit of coverage from my company. But I knew I needed, and could afford, a bit more.

The big questions in the life insurance world typically revolve around the differences between term and whole life insurance. If you end up choosing term life insurance like I did, then the questions shift to “how much life insurance do I need?”

Don’t worry, you mainly need to get insurance on the earners in the family. You can usually do without life insurance on your child. Beyond that there are plenty more questions to ask before you buy insurance on your life.

Once you’ve got all your questions answered, it’s time to start the process of actually getting life insurance. Better to start early because this can take a while. There are applications to fill out. Exams to take.

And the waiting around for the underwriter to do his or her job. But with all this waiting, it’s not hard to find an affordbale term life insurance policy. The quickest way to get started with this process is to request a quote for life insurance to see what’s available to you.

Health Insurance

Health insurance comes in many forms, but it’s generally going to cover your medical expenses for any health related issues (i.e. you have a heart attack) you experience. There are two main types of health insurance: group and individual.

Group health insurance is typically what you get when you work for a company. The risks and costs are spread out amongst the group and so it’s typically a better insurance for you. Better because it’s usually cheaper and it covers more.

Individual health insurance is something you’d have to get for you and your family if you don’t have an employer, or you work part time. Since this type of insurance isn’t purchased by a group, you have to bear the costs and risks to yourself.

For this reason, individual health insurance is usually expensive and doesn’t cover as much. All is not lost though. There are plenty of ways to save money on health insurance, including using a health savings account, and shopping around for health insurance quotes. Get a health insurance quote online today.

Recently, health insurance reform has come to the US. There are lots of changes going on that are going to affect the way this insurance is provided and purchased in the future. Be on the lookout for how these changes will affect you and your finances.

Homeowners Insurance

When you buy a home, condo, town home, or even a mobile home, it’s likely a good idea, and maybe a requirement by your lender, to purchase some homeowners insurance. I would estimate that this type of insurance can cost annually as much as a mortgage payment for you. You can now run a home insurance quote online like you can for car insurance.

What you get in return for your annual or monthly payment is a bit of peace of mind that if something were to happen to your home, like a fire, earthquake, flood, storm, etc, that you would be repaid for the damage.

Now you can see why a lender is interested in making sure you have this insurance. They don’t want to be stuck with the bill if something happens and you aren’t protected by the homeowners insurance.

Car Insurance

Auto or car insurance is probably the most well known and owned of all the insurance types. This, I suspect, is because it’s required in most states. In my state, for instance, you need to have car insurance before you can register your vehicle or have it inspected.

Most states will require a minimum level of coverage for your car to protect others in case you have an accident. But did you know that there are up to 7 types of car insurance you could use to help protect you, your asset, and others?

Deciding which types you need is a thing you need to research and determine for yourself. In that sense, car insurance is probably the most used, but least understood form of insurance.

Although car insurance is usually a required expense if you drive. It doesn’t have to be expensive. And you certainly shouldn’t pay premium prices when you don’t have to. I’ve found that with a little research it’s easy to save money on auto insurance. Request a quote on affordable auto insurance today.

Disability Insurance

This type of insurance helps to cover your loss of income from some type of disability which causes you to lose your job or prevents you from earning an income. You’re far more likely to be injured than killed, so it’s probably smart to have some of this insurance.

Like life insurance, most employers have a basic policy on their employees. But that might not be enough for you, and / or you might not have a job with a company. The self-employed should really look into this type of coverage.

It’s something I need to do for sure. There’s lots to know about disability insurance. Mainly, it’s important to understand the distinction between short term and long-term disability insurance.

Other Types of Insurance

Other forms of insurance include business insurance (people often are concerned that they need business insurance with an LLC or corporation), casualty insurance, crime insurance, accidental death insurance, deposit insurance (FDIC), bond insurance, credit card protection insurance, loan protection insurance, worker’s compensation, travel insurance, and many others.

You can even get insurance for your motorcycle. Check out one of my favorite GEICO insurance commercials (video link):

I hope you enjoyed this walk through the various forms of insurance. So what do you think? Do you have all the insurance you need?

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Last Edited: June 8, 2013 @ 9:58 pm
About Philip Taylor

Philip Taylor, aka "PT", is a husband and father of two. He created PT Money back in 2007 to share his thoughts on money and to meet others passionate about managing their finances. All the content on this blog is original, and created or edited by PT. Read more about Philip Taylor, and be sure to connect with him on Twitter, Facebook, or view the Philip Taylor+ Google profile.

Comments

  1. Great article! I think we sometimes forget all of the different insurance we may need.

  2. Anthony says:

    This is a good article. There are lots of insurances that many people don’t think about. I do have two comments:

    1. I have $500k life insurance through work, but $100k with a private company. I feel that I am adequately insured. Many people want their deaths to replace income for 10 years, pay off the mortgage, student loans, and pay for their children’s college education. While that’s a good idea, that’s NOT the route I took. I’m providing enough for my wife to pay down some of the mortgage, pay for my funeral costs, and replace my income for about 1 year. After that, (I hate saying it this way, but…) she’s on her own or she’ll have to find someone else.

    2. Caution! Every person should check individually, but homeowner’s insurance (at least, in my area) does not cover floods. We are hurricane-prone, so there’s good reason for this. Flood insurance is a separate cost.

  3. life insurance is underpurchased because of the fear of mortality. I think that one should get over it because death is one of the two certainties of life. In any case getting the insurance means that your loved ones profit from your death, which is not entirely a bad thing

  4. RosaCanada says:

    Actually, I personally don’t need car insurance.  I live in NYC, and like many New Yorkers, I don’t own a car.  Public transit here is excellent, there are a zillion car services if I need a quick ride, and when I really need a car, I rent a Zipcar.  In big cities, often it’s possible to get by without a car.  Even a friend of mine with 4 kids had no car for some time.  Not owning a car is a HUGE savings.  Also, if you don’t own a home, I still think you should have insurance on contents – get renters’ insurance. 
     

  5. RosaCanada says:

    Actually, I personally don’t need car insurance.  I live in NYC, and like many New Yorkers, I don’t own a car.  Public transit here is excellent, there are a zillion car services if I need a quick ride, and when I really need a car, I rent a Zipcar.  In big cities, often it’s possible to get by without a car.  Even a friend of mine with 4 kids had no car for some time.  Not owning a car is a HUGE savings.  Also, if you don’t own a home, I still think you should have insurance on contents – get renters’ insurance. 
     

  6. You really make it seem so easy with your presentation but I find this matter to be really something which I think I would never understand. It seems too complicated and very broad for me. I’m looking forward for your next post, I’ll try to get the hang of it! @ http://tinyurl.com/6py5ql6

  7. You really make it seem so easy with your presentation but I find this matter to be really something which I think I would never understand. It seems too complicated and very broad for me. I’m looking forward for your next post, I’ll try to get the hang of it! @ http://tinyurl.com/6py5ql6