Insurance is something you hope to never have to use. But, when you need it, you’re thrilled you have it.
Months and even years can pass where you never have to use your insurance. During those times, monthly premiums can seem like a waste of money. But, if you get into a car accident, suffer an illness, or a hail storm ruins your roof, insurance is a safety net that can end up saving you thousands of dollars.
You can buy insurance for almost anything, from a plan covering your new iPhone to one insuring a specific body part or voice, if you’re a celebrity or entertainer. But, for the Regular Joes and Janes out there, here’s what you need to know about five common types of insurance.
Most employers cover part or all of your health insurance costs, including medical, vision, and dental insurance. Medical insurance covers any health- or surgical-related expenses you might need, like a doctor’s visit to see if you have the flu or surgery to repair a broken arm. It also covers part of the cost of medicine, but some insurance plans require a co-pay for more expensive antibiotics.
If your employer doesn’t offer health insurance—or if you’re self-employed—you can sign up for health insurance each November during Open Enrollment by visiting HealthCare.gov. The price of premiums vary depending on your age, health, and pre-existing conditions.
Buying a house is one of the biggest financial purchases you’ll make in your lifetime, so you’ll want to protect it. Homeowner’s insurance covers loss or damages to your home, as well as any assets, such as jewelry, collectables, and some electronics. It can also protect you if someone gets hurt on your property. Like with all types of insurance, premiums vary depending on numerous factors, including the value of your home, its location, and how close you are to a fire department.
For those who don’t own a home and rent instead, renter’s insurance can help cover the loss or damage of your personal property, such as electronics, furniture, or jewelry. Renter’s insurance is much more affordable than homeowner’s insurance and can help protect you against loss, damage, or theft. Plus, some plans even cover pets!
Buying a car is another big purchase many of us make and is a valuable asset that’s important to protect. The price of premiums depend on the value of your car, how often you drive, and which type of coverage you want.
The most common reason people purchase auto insurance is for liability coverage; if you get into an accident and you’re deemed at fault, you are responsible for damage done to your car and others. You can also get more comprehensive coverage such as collision insurance, medical payments coverage, and personal protection.
Most types of insurance can be viewed as protecting yourself against the worst-case scenario. But, when it comes to life insurance, your premium protects your dependents from their worst-case scenario: your death. If you have life insurance and pass away, the insurance company will pay out a lump sum—also referred to as a death benefit—to your beneficiaries after you pass.
You can buy as much or as little life insurance as you’d like, but some good rules of thumb to consider are your annual salary, your spouse’s or beneficiary’s annual salary, your lifestyle, and number of dependents. Some companies offer a basic life insurance policy to their employees which, for a single person, might be enough. But, if you’re married and have children, purchasing additional life insurance is probably warranted and could bring you peace of mind.
Life insurance is also often presented as an investment option, but be sure to do your own research and/or discuss that option with a financial advisor.