Types of Insurance And Why You Need Them

You can’t prevent unexpected events from happening. However, you can make sure you’re as prepared as possible to protect yourself and your family from the worst of any financial hardship you could experience from an unexpected life event.

In addition to having an emergency savings fund, it’s critical to have the appropriate insurance to help after an unexpected event. Let’s explore some of the primary types of insurance and why they’re necessary.

Types of Insurance Policies

There are many different insurance options out there, from travel insurance to pet insurance. Let’s take a look at the most common ones you may encounter and why they’re important.

Life Insurance

Life insurance provides financial protection for your family after your death. This type of insurance primarily falls under two categories: term life insurance and permanent life insurance.

Term life insurance gets you through a specific period of time and is generally more affordable than permanent life insurance policies. Throughout the term of this type of insurance—generally 10, 20, or 30 years—your premium remains stable. Term life insurance coverage is ideal for before your mortgage is paid off or while your child is in college to make sure your family is taken care of financially in the event of your death. 

Permanent life insurance is a broader policy to give you and your family peace of mind over a longer period of time. As the value of your policy grows, you can take out a loan, withdraw funds, or end the policy and take out the cash value of it. That makes it an income tool as well as an insurance tool. However, it’s important to weigh the pros and cons of this practice because you want to make sure your family has what they need to remain financially stable.

Health Insurance

Medical debt is one of the primary causes of financial hardship. Approximately two-thirds of people in the U.S. who file for bankruptcy cite medical bills as a key contributor to their financial issues. Health insurance can significantly decrease the amount of medical bills owed.

Employers generally provide health insurance, but if your employer doesn’t you can shop for a health insurance plan through the federal marketplace. When you’re evaluating health insurance plans, make sure to look at how much it’s going to cover for you—don’t just focus on the monthly premium. It’s important to keep in mind that lower premiums could mean higher medical bills and increased out-of-pocket costs for sick visits, surgeries, and other services.

Disability Insurance

It’s a common misconception that you only need disability insurance for jobs with dangerous activities where you may become injured.

Disability insurance financially protects you if you become disabled and aren’t able to work—even if the injury isn’t work-related. The most common causes of disabilities include cancer, arthritis, back pain, and diabetes. Disability insurance replaces a portion of your income—generally 40–70 percent—that you otherwise wouldn’t receive while out of work due to disability, making it a smart addition to your financial plan.

Car Insurance

It’s illegal to drive without car insurance in nearly every state. Driving without car insurance can cost you significant amounts of money if you are in a car accident and are found at fault.

Just like with health insurance, you need to ensure you’re getting the appropriate amount of coverage you need rather than focusing solely on the monthly premiums. It’s also important to pay attention to what your deductible—the amount you pay out of pocket before your insurance kicks in—is in case anything should happen. Having little coverage with a high deductible could put you in a tight financial situation if you are in an accident.

Home Insurance

It generally isn’t required to have homeowners coverage, but if you received home financing your lender may require it. This protects your lender’s interest in your home so you’ll have the funds you need to rebuild if your property is destroyed or damaged.

Renters Insurance

Renters insurance is generally required by apartments if you’re renting. This type of coverage helps you replace furniture, clothing, and electronics if they’re damaged or stolen. The problems covered by renters insurance include fire, explosions, tornadoes, theft, and more. This type of insurance can be expensive, so it’s important to shop around to make sure you have the best rates and appropriate coverage.

Be Prepared with Insurance that Meets Your Needs

Making sure you and your family are protected will help give you peace of mind. 7 17 has several resources that can help you get what you need for your home insurance, auto insurance, life insurance, and more. Explore personal insurance options today.