Are You Fully Covered? An Overview of the Main Types of Insurance

• Author: Bernard Langworth
• Posted: 2023-12-10

Insurance provides consumers with protection from losses that may occur in the future. Insurance can provide for the replacement of assets such as a home and car or cover expenses that a mishap may incur. Additionally, it can provide financial coverage in case of death or disability and protection against financial losses. Below are the main types of insurance available to individuals.
 

Life Insurance

The cost of living has risen considerably over the years, leaving many unable to afford the charge of their funeral and burial arrangements. Life insurance ensures that, if you are no longer around to care for your family and loved ones, they will have financial support from the money you put aside if something happens to you. When purchasing life insurance, consider buying a policy with a large sum assured wherein you receive significant benefits in case of death or losing your job. Life insurance policies are divided into two categories: term and whole/universal life. Term insurance provides you with a lump sum or a series of monthly payouts in case of death and is the most affordable. However, it only covers a specific period, after which you must renew your policy. Whole/universal life insurance provides you with the maximum amount of coverage and has a higher premium than term insurance.
 

Health Insurance

Health insurance is a form of protection from future medical expenses caused by an illness or accident. Since medical care costs are increasing rapidly, health insurance is a necessity for most people. Two types of health insurance are available on the market: hospitalization and outpatient. Hospitalization covers the cost of staying overnight, while an outpatient policy covers doctor's visits, lab work, and other diagnostic procedures. In addition, health insurance policies typically provide coverage for prescription medication and the cost of rehabilitative therapy. The premium for health insurance is generally based on a percentage of annual salary, depending on the length of coverage required.
 

Disability Insurance

Disability insurance protects from financial loss caused by a physical or mental inability to work. The link between poor health and poverty is well documented; however, many people only realize how much they rely on their income when they can no longer work. Disability insurance can be purchased individually or as part of a group policy via an employer. A disability policy typically covers 70% of the employee's salary for a limited period, varying from 12 to 24 months, depending on the employer.
 

Auto Insurance

Auto insurance protects the car owner against financial loss resulting from accidents involving their vehicle. There are several types of auto insurance, depending on the kind of coverage desired. The most common form of coverage is liability insurance. Liability covers damage to other people and property from an accident involving the insured's vehicle. The second most common coverage is collision, which covers damage to the insured's car in an accident. Comprehensive covers damage to the insured's vehicle in a non-accident situation, such as vandalism or theft. Auto insurance is commonly made mandatory by state governments although each state's requirements vary.
 

Housing Insurance

Housing insurance provides financial protection against loss or damage to the insured's residence. The insurance company will repair or replace the damaged property in the event of a covered loss. There are two primary forms of coverage: replacement cost and actual cash value. Replacement cost coverage will cover replacing damaged or destroyed property with a comparable new property. In contrast, the cash value will cover only what it would have been worth when destroyed. In addition, housing insurance may also cover the cost of renovation and renovation materials that a covered loss has damaged. Although insurance cost may increase during specific periods, such as an economic recession, it typically decreases over time to reflect more stable markets.

The above are the main types of insurance available to consumers. Insurance is a crucial and necessary tool for everyone. Without insurance, people could easily find themselves in a financial crisis and have to make impossible choices between their college education, their food on the table, or their medicine. As you can see, there are many benefits of insuring one's assets against unforeseen future expenses.