Basic Insurance Policies to Know About

When trying to decide on the types of insurance you should have, there are hundreds of different insurance policies to consider. Shopping for insurance can be difficult, as every policy requires you to consider a worst-case scenario in order to justify the expense. You may be tempted to take out as many insurance policies as possible, just to safe. Alternatively, you may find the choices overwhelming, and decide to take the risk of living without any kind of insurance.

Knowing the basic types of insurance that are recommended for the average American adult can be an important first step in planning your insurance policies. Everyone will have their own needs when it comes to insurance. These common policies, however, should be suitable for anyone. Having a minimum plan for your insurance can help to keep your monthly costs down, while still allowing you to keep covered in all the areas necessary.

Car Insurance

In many states, auto insurance is required by law, and driving without it can incur serious legal consequences. Even if you are not required to have auto insurance, however, you will still be expected to pay for any damages you cause while in your vehicle. Additionally, the costs of repairing your car after a collision or other damage can be extremely high.

Two basic auto insurance policies all car owners should know about are as follows:


  • Liability insurance covers you in the event that you are responsible for an accident. You should be able to find a policy that provides for the damages caused to the vehicles and property of others. A good policy should cover medical expenses for anyone who was injured. It might also be able to provide for legal costs in the event that you are charged with an offense.


  • Collision insurance covers the damages to your own vehicle after a road accident. A basic policy might only cover accidents for which you were responsible. Your policy might cover the cost of a rental car if you are unable to drive your own while it is being repaired or replaced.

Home Insurance

Insurance for your home can be crucial if your residence is damaged by any kind of accident or natural disaster. The possible causes of home damage will vary depending on where you live, and you may find common policies for your area that cover high risk events such as wildfires, floods or earthquakes.

If you have a mortgage, you are required to have homeowner’s insurance, and your premiums may be combined with your mortgage payments. A basic policy should cover the structure of the home as well as your belongings. You might also obtain coverage for accommodation if you have to live elsewhere while your home is repaired.

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If you do not own your home, you are not covered by the homeowner’s policies. Instead, you can take out a renter’s insurance policy. This covers the value of your personal belongings in the event of damage. Home insurance can also include liability coverage. If someone is injured in your home, for example, your policy might be able to cover medical or legal costs.

Health Insurance

Health insurance may be the most beneficial type of insurance to have. Medical expenses can be extremely high, and often occur without warning. In addition to this, you generally do not have the option of refusing medical care, regardless of expense. A serious injury or illness could easily result in bankruptcy if you are not properly covered.

You may be able to obtain health insurance through your work. Even part-time positions might be able to provide you with an affordable policy. If you are married, you may be covered under your spouse’s work policy. Otherwise, there are many different types of policies you can choose from, depending on your needs.

While those who are young and healthy should still take out health insurance, you could take out a policy with a higher deductible to save money on monthly premiums. If you have frequent health issues, you might choose a policy with a lower deductible or a better rate of co-payments. Those over 50 years of age could find a policy through AARP. Others can find a suitable plan using the Healthcare Marketplace, or by comparing quotes from health insurance providers yourself.

Life Insurance

Life insurance is particularly recommended for those who support their families in some way. Even if you are not the sole breadwinner of your household, you could help to ensure that your family will receive extra support after you pass away by taking out a life insurance policy.

A basic policy will cover funeral costs, and should be able to provide for debts you have left unpaid after your death. You could extend your policy to provide funds for a spouse or children, perhaps even paying toward future college tuition.

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You may be able to take out a life insurance policy through your workplace, or find and compare quotes to suit your needs. There are two types of life insurance you may be asked to decide between:


  • Term life insurance is taken out for a specified period, perhaps 10 to 30 years. During this time, you will make payments until you reach the end of the term, at which point you can end your payments or renew the policy. This is generally the most affordable type of life insurance.


  • Permanent or whole life insurance means the policy will last until you die, and you will continue making payments to this point. This is often seen as a type of investment, which may make it preferable despite the higher costs.

Disability Insurance

Long-term disability insurance can provide for you in the event that you are unable to work. This could cover a time period such as a few years, or could provide for a permanent disability. Veterans also have special plans that can assist them.  An illness or accident that results in disability is impossible to plan for, and your daily income could be lost immediately as a result. Disability insurance helps to provide for you after such an event occurs. This type of insurance could be taken out through your workplace, or through a private provider.

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