An Overview of the 6 Most Common Insurance Types

There are many things in life we have to pay for every month — like the rent or a mortgage — but buying insurance isn’t one of them. Even so, responsible people do it anyway because they know that, if bad luck strikes, trying to save a few bucks by not buying insurance can quickly lead to severe financial difficulties.

In fact, almost anything can be insured — from your home to the expensive artwork inside it. With that in mind, here is a brief, no-nonsense, summary of the most popular insurance types — and a few general guidelines to ensure you buy wisely:

Life Insurance

Life insurance protects your family by providing for your dependents in case you die prematurely.

Homeowners Insurance

Homeowner policies shield you from losses due to theft, and fire or other damage to your home or personal property; it also provides accident liability coverage.

Auto Insurance

Auto insurance guards against expensive repair, medical and liability costs that can result from major accidents.

Travel Insurance

Travel insurance is intended to cover the costs of things like lost luggage, medical expenses, trip cancellation, flight accidents and other losses while you’re away from home.

Disability Insurance

Disability insurance is designed to cover your lost income during periods of time that you’re unable to work because of injuries, accidents, or illness; it covers permanent, temporary, partial and total disability.

By the way … Don’t think it can happen to you? Think again: Slightly more than 25% of today’s 20-year-olds will suffer a disability before they retire.

Health Insurance

Health insurance helps covers the cost of doctor and surgical expenses.

Insurance-Buying Guidelines

Regardless of which type of insurance you’re looking to buy, here are a few general tips that will help you choose wisely:

• Comparison shop. Insurers are known to price identical risks differently. So always shop around. The good news is that Internet shopping is painless.
• Know what you’re buying. If you don’t understand certain benefits, terms, or conditions, always ask your insurance agent to explain them to you.
• Occasionally reevaluate. Review your insurance annually. Life-changing events such as the birth of a new child, divorce, retirement and income reductions usually call for coverage updates or additions.
• Combine coverage. Bundling two policies from the same customer can often result in insurers chopping premiums by as much as 20%.
• Check for coupons. It’s true; some insurance companies actually offer online coupons!
• Take advantage of discounts. Even if they don’t offer coupons, many insurance companies give out discounts for safe driving, being a good student, working low-risk occupations, and being a loyal customer.
• Consider an umbrella policy. If you’ve got a lot of assets, an umbrella policy will cover you beyond traditional policy liability limits.
• Don’t fear higher deductibles. As I’ve mentioned many time before, folks rarely make claims under $1000 because they’re rightly afraid it will raise their rates — so why pay a premium for lower deductibles if you aren’t going to take advantage of them?

Photo Credit: David Hilowitz