For Peace of Mind: 5 Types of Insurance Plans Everyone Should Have
Having various types of insurance plans under your umbrella may cost you now, but it’s intended to save you, financially and otherwise, in the long run.
For example, not having health insurance means that one accident, surgery, or illness can leave you with poor credit, medical debt, and even bankruptcy. Since we can’t predict emergencies such as these, even those in good health could find themselves in a situation like this.
In fact, medical debt alone has been the number one cause of personal bankruptcy in the US. Even if your situation (i.e., a broken leg, a car accident) doesn’t result in bankruptcy, the outstanding medical bills could take a significant toll on you.
That being said, there are certain types of insurance policies meant to protect you from this ever happening. Here, we cover five basic types that almost every American needs, barring personal needs.
Table of Contents
1. Health Insurance
Health insurance comes first on our list because it’s a policy everyone needs. Not everyone owns a home or a car, but everyone has a body—and it deserves your preventative care!
If you ever face high, unexpected medical costs, that’s where health insurance kicks in. Having a health insurance policy has several benefits, such as
- Coverage of essential health needs, such as treatment for illness or accidents
- Protection from sky-high medical bills
- In-network health care costs are much lower
- Free preventative care for a wide range of issues, such as vaccines, screenings, and check-ups
Many of these benefits can even begin to take place before you meet your deductible. Insurance companies work directly with health care providers to negotiate specific discounts.
On average, those without health insurance can expect to pay twice the dollar amount for their care.
2. Auto Insurance
Every state in the US has rules in place that make auto insurance mandatory for car owners. You also need to carry proof of this insurance with you to provide evidence of your financial responsibility, especially in the case of an accident.
There are five types of insurance plans when it comes to auto insurance:
- Bodily injury (BI) liability—This covers another driver’s injuries (required in every single state except Florida)
- Property damage (PD) liability—For another driver’s vehicle or home
- Uninsured/underinsured motorist BI—Provides coverage for your injuries if another driver is uninsured
- Uninsured/underinsured motorist PD—Provides coverage for your car if another driver is uninsured
- Personal injury protection—This type covers you and/or your passenger’s injuries
While you may not be required to have all five types of coverage, each of the 50 states requires a minimum amount of car insurance. This guarantees financial responsibility in the case of an accident.
Check with your state to find out what is mandatory there.
3. Homeowner’s Insurance
If you own a home, it’s likely required that you have homeowner’s insurance. Even if it’s not mandatory in your state, it offers clear benefits, protecting your home and your personal belongings within it.
Homeowner’s insurance covers
- Your dwelling
- Other structures on your property, such as sheds, barns, etc.
- Personal property
- Liability for injuries that occur on your property
- Damage to someone else’s property
Specific perils, like theft or fire, are unpredictable, and homeowner’s insurance provides peace of mind. Plus, it covers you in case you accidentally injure another person or damage their property (i.e., their car) while on your property.
Homeowner’s insurance covers many situations, but not all of them. For this reason, you can negotiate a policy that covers other things, like floods or earthquakes. For example, if you live near the coastline in Florida, you’ll probably want to check out a flood insurance cost estimator.
4. Disability Insurance
We already discussed the benefits of having health insurance, which covers a wide range of potential problems. But what if your health issues cause you to become disabled? In this case, health insurance wouldn’t provide all the support you need.
If you become disabled, and therefore can’t work, pay bills, or afford the cost of daily living expenses, you’d need to have a disability insurance policy in place.
Unlike Social Security disability, which has specific eligibility requirements (not to mention a rigorous application process), disability insurance is available to anyone.
Disability insurance comes in short- and long-term policies.
How long is short term disability insurance? Short-term disability has a one- or three-year period and can cover your monthly income as high as $3,000, depending. Long-term disability has a five-year period and can replace a portion of your monthly income up to $20,000, depending.
5. Life Insurance
Life insurance is particularly necessary if you have a spouse and/or a family. This policy provides cash to your beneficiaries, which replaces your income if you passed away.
This money can be used for anything, including a funeral, but can also be used for things like college tuition, mortgage payments, daily living expenses, and more.
Life insurance policies come in two forms:
- Term—Lasts until your debts are paid off, typically 20-30 years
- Whole—A permanent product that covers you until your passing
While many people find that term life insurance makes the most sense for them, each policy offers different benefits.
Do You Have These Types Of Insurance Plans?
If not, now’s the time — even if only for your peace of mind.
If something terrible were to happen to you, your home, your car, it’d be too late. You need to invest in these types of insurance plans now, as a preventative, before you find yourself facing outstanding bills and debt. These policies can help see you through several adverse situations, ensuring you (and your bank account) come out on the other side intact.
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