8 Types of Insurance You Need to Consider Having in Your Financial Plan

Do you ever wonder how you would be able to take care of your expenses, if you were injured? What about how your family would make up for your primary or secondary source of income if you were to pass away unexpectedly? How would you pay for an emergency hospital stay?

Why is it that so many people ignore the importance of insurance, while handling all of their other bills, so responsibly? Having insurance is an essential part of an overall financial plan, but no one seems to talk about it, or necessarily pay for policies, except for auto insurance, of which it is illegal to not have coverage.

Following are the 8 main types of insurance, and their importance in your financial plan:

Life Insurance:

Life insurance can provide money to your beneficiaries, in the event that you pass away. This can be important in helping your family cover expenses, without your income. There are several kinds of life insurance, falling under two umbrella categories:

Term Life Insurance: This requires a simple premium covering a specific period of time of coverage, and is generally cheaper. Many experts say this is appropriate for most people.

Permanent Life Insurance: This typically covers you until your death, as long as your premiums are paid. It also sometimes builds a cash value that can earn interest, and be borrowed against, like equity in a home.

Health Insurance:

Health insurance is vital, in case you have to have any visits to the emergency room, or pay for expensive medications. It can also cover routine doctor visits, as well as visits to specialists. Health insurance can serve as a safety net, covering bills that most people cannot handle out-of-pocket. There are several types of health insurance plans:

Health Maintenance Organization (HMO): you are required to meet with your primary care physician, before being referred to any specialists.

Preferred Provider Organization (PPO): you do not have to get a referral from your primary care doctor to see a specialist.

Exclusive Provider Organization (EPO): no coverage for out-of-network healthcare providers

Point of Service Plan (POS): blends features of HMO and PPO plans 

Catastrophic Plan: lower premiums, and free preventive care.

High-Deductible Health Plans (HDHP): lower premiums, but higher deductibles. 

Disability Insurance:

Similar to life insurance, disability insurance helps protect you and your family from a loss of one source of income, in case of a serious physical or mental injury or illness. There are two major types of disability income: short-term and long-term, with each providing a 50%-80% replacement of your income.

Long-Term Care Insurance:

Long-term care insurance helps to cover the costs of a senior living home, whether it is an assisted living facility, a nursing home, or home care. Without insurance, these costs can be prohibitive.

Liability Insurance:

Liability insurance helps to pay for the legal and medical bills of anyone if you or your business is held responsible for his or her injury. There are three main types of liability insurance:

            General Liability: covers business claims.

            Professional Liability: covers claims that your business made service errors.

Employer Liability: covers employees getting work-related injuries or illnesses. 

Homeowners Insurance:

Homeowners insurance can help pay for rebuilding damage or a total loss of your home. It can also provide liability coverage for injuries or damage from someone else on the property.

Renters Insurance:

Renter’s insurance covers the personal property owned by the tenant of a rented property, and is not the responsibility of the landlord. The landlord is expected to have coverage on the building itself.

Auto Insurance:

Auto insurance is legally required for anyone who is driving a car, with state mandated minimum liability coverage limits. There are five basic types of coverage within an auto insurance policy, which can be selected and adjusted by the insured:

Liability: protects the other party, when you are at fault in an accident.

Physical Damage: pays for any kind of damage to the car.

Rental: provides liability coverage for rental cars.

Personal Injury Protection (PIP): pays for medical expenses when you and passengers in the car are in an accident, regardless of who is at fault.

Uninsured and Underinsured Motorist Coverage: pays for expenses if you are in an accident with an uninsured or underinsured driver.

As you can see, there are several different types of insurance that you should consider in your financial plan. It may seem tedious and tiresome to review them, but being insured in each of these areas can save you hundreds or thousands of dollars, in the long run.

They are also important, just to have peace of mind, knowing you have insurance, in case of an accident or illness. So make sure to review your options with a reputable insurance company, and possibly a trusted certified financial planner, and you can sleep better knowing you are covered.