The Different Types of Insurance and Which Ones You Need (Part 1)
Are you unsure of what type of insurance you need? Are you concerned that you’re missing out on something that could provide you with financial protection and peace of mind?
With so many different types of insurance to consider, you must take a step back to gain a clear understanding of what you need.
Below, we touch on every possible type of insurance policy, along with who needs it, pros and cons, and much more.
Note: this is the first part of a two-part article, so there’s more information to come.
How Do Insurance Policies Work?
While no two types of insurance are the same, the basic manner in which they work is identical.
You purchase a policy from an insurance provider to help mitigate future financial risks in the event of a claim.
For example, you hope that you never have to make an auto insurance claim, but if you do, your insurance policy will kick in to minimize the out-of-pocket cost.
How Do I Get Insurance?
There are two basic ways to purchase insurance coverage:
- Directly through an insurance agent
- With the assistance of an insurance broker
When you work with an agent, you have a direct pipeline to many types of insurance.
An insurance broker doesn’t provide policies from one specific company. Instead, they will consider all your needs and then shop around on your behalf to find the best policy.
Adding to the above, you no longer have to shop for insurance by contacting an agent or broker directly. Instead, you can do all the work online, which saves you both time and money.
Home insurance provides coverage to rebuild or repair your home after events such as vandalism, water damage, fire, and theft.
Also, most home insurance policies cover possessions — such as electronics and jewelry — that you keep inside your home. This is in addition to personal liability protection if someone is injured on your property.
Home insurance kicks in if you file a claim with your insurance provider. At that point, you’ll pay your deductible and then your policy will kick in to cover the rest of your loss.
Do I Really Need Home Insurance?
As one of your largest investments — if not the largest — it’s important to protect your property with a comprehensive insurance policy.
If you have a mortgage, your lender will probably require proof of a home insurance policy.
You may never make a home insurance claim, but that doesn’t mean it’s a waste of money. The protection it provides will give you peace of mind.
Different Types of Home Insurance
Many types of coverage fit under the “home insurance umbrella.” These include:
- Contents insurance: This pertains to the contents that you keep inside your home, all of which you want to cover against damage.
- Landlord insurance: As a landlord, you have a tenant or tenants living in your property. You must protect the property and yourself accordingly.
- Renters’ insurance: This pertains to people who rent a home or apartment, as opposed to own.
- High-value home insurance: If your home is considered high-value by your insurance company, this type of coverage may come into play.
- Non-standard construction insurance: Do you have any non-standard construction on your property, such as a pool house? That’s where this type of coverage fits in.
- Vacation home insurance: Just the same as your primary home, you can purchase an insurance policy for a vacation home, such as a beach condo.
The types of coverage you buy depend on your situation. When you put together everything you need, you end up with a comprehensive insurance policy.
The Best Home Insurance Companies
No matter when or why you’re shopping for home insurance, it’s good to know that there are hundreds of companies to turn to for assistance.
Here are three of the best home insurance companies:
- Lemonade: Lemonade is a new entrance to the renters’ and home insurance industry, but it has quickly moved to the forefront thanks to its streamlined online system, affordable prices, and fast process. From a liability insurance policy to something much more comprehensive, Lemonade has you covered. You can find out more about Lemonade in our Lemonade review.
- Amica: For more than 100 years, Amica has been providing American homeowners with comprehensive insurance. Amica is a one-stop shop, allowing you to buy a liability insurance policy, coverage for your possessions, and protection for your home.
- MetLife: MetLife has 90+ million customers across the world, making it one of the largest home insurance companies. Founded in 1868, MetLife is one of the oldest and most experienced companies in the insurance space.
A car insurance policy — also known as a motor insurance policy — is designed to protect you and your vehicle in the event of an accident.
It provides protection by ensuring that you’re not on the hook to pay for damages, no matter who caused them.
Should you find yourself managing the aftermath of a car accident, contact your insurance agent to start the claims process.
Anyone who operates a motor vehicle in the United States is required to carry the minimum level of coverage as outlined by their state. Driving without car insurance is a big risk, as it can result in a large fine and license suspension.
The type of coverage you purchase depends largely on your state, budget, and what you’re most comfortable with.
For example, you may be most interested in a comprehensive motor insurance policy, as this gives you protection across the board.
Conversely, you may be looking to save money, which will change the type of coverage you’re seeking. In this case, a minimum coverage policy may suit you.
The level of coverage you purchase is important, as it determines what happens in the event of an accident. There are questions to address such as:
- Do you need third-party fire and theft coverage?
- What will happen if you’re the victim of a hit and run?
- How much underinsured/uninsured coverage do you want?
Every insurance company has a variety of options, so keep an open mind as you shop and compare policies.
The Best Car Insurance Companies
There’s no right or wrong way to compare vehicle insurance companies. However, there are several that stand out in this crowded industry. They include:
- Gabi: As an online insurance broker, Gabi makes it easy to quickly and efficiently compare car insurance policies. Check out our review of Gabi for more information.
- USAA: USAA provides millions of military members and their families with auto insurance. The catch here is that you must have a connection to the military, either as someone who served or an immediate family member.
- Liberty Mutual: As one of the largest vehicle insurance companies in the United States, Liberty Mutual has a longstanding reputation for providing top-notch customer service, comprehensive coverage, and affordable premiums.
Travel insurance is a policy that protects you from predetermined financial risks and losses that can occur before or while traveling.
The way that travel insurance protects you depends on the policy you purchase.
For example, it may cover you against minor inconveniences such as a delayed suitcase or flight.
It can also cover you against things such as trip cancellation or a medical emergency.
There are three keys to buying travel insurance:
- Know that you may not use it
- Know what is and isn’t covered
- Know what type of proof is required to receive compensation
Anyone can benefit from travel insurance. It provides you with peace of mind and can save you a lot of money should a disaster strike.
Different Types of Travel Insurance
The level of coverage you receive depends on the type of travel insurance you purchase. Your options generally include:
- Single trip travel insurance: This is a one-time policy that pertains to a single trip.
- Annual multi-trip travel insurance: This is best for people who take multiple trips over the course of a year.
- Pre-existing medical conditions coverage: If you’re traveling with a pre-existing condition that could cause you trouble while you’re away from home, this type of coverage can save you money on medical expenses and related bills.
The Best Travel Insurance Companies
Don’t buy travel insurance from just any company. Instead, consider these three above all others:
- Travelex: Travelex is best for those seeking a comprehensive travel insurance policy.
- Allianz: Allianz is one of the most reputable companies in the travel insurance space, having sold more than 30 million policies to travelers.
- InsureMyTrip: With a simple-to-use online system, it only takes a couple of minutes to find the right travel insurance through InsureMyTrip.
There’s nothing simple about buying a life insurance policy, as it will impact your budget and force you to come face to face with your mortality.
Life insurance is exactly what it sounds like. Upon your death, your beneficiary will receive your death benefit.
There are two reasons to purchase life insurance:
- Peace of mind in knowing that your loved ones will be financially secure after your passing.
- To ensure that your beneficiary or beneficiaries have financial assistance if you’re no longer able to provide for them.
In general terms, anyone with a spouse and/or children can benefit from buying a life insurance policy. However, anyone can purchase coverage, such as someone who wants to leave their death benefit to a favorite charity.
You’re not required to purchase life insurance, but it may be just what you and your loved ones need.
Different Types of Life Insurance
There are types of life insurance policy to consider, with these among the most common:
- Term life insurance: With this, you purchase coverage that protects you for a predetermined period of time, such as 15 or 20 years.
- Whole life insurance: This type of life insurance policy covers you until the day you die, as long as you stay current with your premiums.
- Universal life insurance: This is a cash value life insurance policy that also pays a death benefit.
The Best Life Insurance Companies
With so many life insurance companies to choose from, it’s essential to compare your options. If you’re new to buying coverage, here are three of the best places to turn:
- Prudential: Prudential has a reputation for affordably priced life insurance, as well as access to many types of policies.
- State Farm: With State Farm agents located throughout the United States, buying a policy is simple. Also, if you want personalized service, it’s a good choice.
- Transamerica: Transamerica is a holding company for a variety of life insurance providers, which helps you access the best rates on every type of coverage imaginable.
Overall, these companies are leaders because they suit the needs of almost every buyer. It doesn’t matter if you want term life insurance, joint life insurance, or some other type, you’re likely to find it.
If you don’t have a health insurance policy, you could find yourself drowning in expensive medical bills.
Medical insurance is designed to pay for some or all of your medical bills, including but not limited to doctor visits, emergency room visits, testing, and surgical procedures.
In the United States, there are multiple ways to secure medical coverage, such as through your employer or by purchasing a policy through the “marketplace.”
Different Types of Health Insurance
You don’t want to buy just any type of health insurance policy. You want to buy the one that provides the most coverage at a price you can afford. Your options include:
- Health maintenance organizations (HMOs): An HMO is a medical insurance group that provides healthcare services for a fixed annual fee.
- Exclusive provider organizations (EPOs): With an EPO, you have access to a local network of doctors and healthcare facilities at which you can receive care.
- Point-of-service (POS) plans: Best described as a hybrid of HMO and PPO plans, you pay less money by using doctors in network.
- Preferred provider organizations (PPOs): You have access to both in network and out of network doctors and facilities, but it’s more affordable to seek care from those that are in network.
The medical insurance coverage you purchase depends on your budget, personal and family needs, and how you plan on securing a policy.
The Best Health Insurance Companies
There’s no shortage of health insurance companies in the United States, with these three among the highest rated:
- Cigna: Cigna is a nationwide health insurance company with multiple policy types and industry-competitive premiums.
- United Healthcare: United Healthcare provides coverage to tens of millions of customers. A simple to use online system makes it easier to learn more about your options.
- HealthPartners: HealthPartners isn’t the largest insurance provider, but it’s highly rated for customer service, selection, and price.
No matter the company you choose, learn more about your options, such as the ability to add critical illness insurance.
If you have a pet, you know that vet visits and emergencies can hit your bank account hard. That’s why buying pet insurance is something you should at least consider.
Pet insurance is the same as health insurance, with the only difference being that it covers your pet.
When your pet requires care, contact your insurance policy to learn more about what is and isn’t covered. This gives you a clear idea of how much you’ll have to pay out of pocket.
Anyone who owns a pet can benefit from this type of insurance. You know your pet will require medical care at some point, so your policy will get used.
Different Types of Pet Insurance
Pet insurance policies come in many different forms, with these among the most common:
- Lifetime pet insurance: This is the most expensive and comprehensive type of pet insurance. As long as you stay current with your premiums, your pet is covered.
- Time-limited pet insurance: This covers you for up to 12 months from the date that your pet’s injury or illness was discovered. After that, you’re solely responsible for expenses.
- Accident-only pet insurance: Accident-only insurance covers you if your pet is injured in an accident.
- Maximum benefit pet insurance: These policies have a maximum lifetime payout.
The Best Pet Insurance Companies
Pet insurance is too important to purchase from just any company. Choose carefully, starting with these three options:
- Lemonade: With Lemonade, you can shop for and purchase coverage online within a matter of minutes. Lower overhead costs allow them to pass on savings to you, the customer. Find out more in our Lemonade review.
- Pet Assure: With plans starting as low as $7.95/month, Pet Assure is one of the most affordable pet insurance companies.
- PetFirst: PetFirst has a hassle-free online system for obtaining a free quote. Policies start as low as $9/month for cats and $15/month for dogs.
Frequently Asked Questions (FAQs)
Most people agree that it’s not exciting to purchase any type of insurance. But of course, they also agree that it’s necessary.
Here are some frequently asked questions that you may need to address:
How much can you afford to pay for each type of insurance?
The answer depends largely on the coverage you require, as well as your current income and expenses.
Do you need a liability insurance policy?
Most home insurance policies include this, but it’s worth checking on before making a purchase.
What is commercial property insurance?
Also known as buildings insurance, it covers commercial properties such as office space and retail developments. A commercial property insurance policy protects against things such as structural damage due to weather, fire, and vandalism.
There’s a good chance you need one or more of the types of insurance detailed above.
The best thing you can do is decide what you need, contact agents and lenders, and then compare multiple policies.
By taking this approach, you’ll end up with the coverage you need at a price you can afford.
Reminder: this is the first part of a two-part series outlining the different types of insurance. Keep an eye out for the second part coming soon!