As a financially responsible person, there are certain types of insurance you should have.
The following gives you an overview to get you started, but these aren’t the only types of insurance—they’re just of the basic policies that are must-haves.
Auto Insurance
The type of auto insurance coverage you should have depends on a few different factors, including what state you live in and the type of car you drive. For example, in Florida, you’re required to have PIP and liability coverage, but not things like bodily injury coverage.
PIP stands for personal injury protection, and if you live in a no-fault state, which Florida is, then you will need PIP coverage.
Even if you’re only required to have a certain level of coverage, you might want more than that to protect yourself if you are in an accident. While purchasing the minimum amount of auto insurance might save you money in the short-term, it can be catastrophic in the long-term.
Homeowners or Renters Insurance
Homeowners insurance is a type of home insurance that covers damages or losses to your home, as well as assets and furnishings in the home. When you have homeowners insurance protection, it also gives you liability coverage if someone is hurt in your home or on your property.
A homeowners policy will usually cover damage to the interior or exterior of a home. A homeowners insurance policy has a liability limit, and you are required to pay a deductible. A deductible is the out-of-pocket costs you have to meet before your coverage kicks in.
If you aren’t a homeowner but you’re a renter, a renter’s insurance policy covers unexpected events. There are three types of coverage that qualify as renter’s insurance. There’s personal property coverage, which covers the cost to repair or replace your belongings, up to your policy’s limits. There’s liability coverage, which covers the cost of repairs if you damage someone else’s property or if you have someone in your home and they get hurt.
There’s also a type of coverage called additional living expenses, for costs that you incur if your rental home is damaged and you can’t live there for a period of time. Hotel bills are an example of something that might be covered by additional living expenses.
Health Insurance
It’s estimated that medical debt leads to almost half of all bankruptcies in the U.S. If you aren’t insured, or even if you’re underinsured, it could lead to a financial disaster.
One emergency could mean that you’re left with the bill for hundreds of thousands of dollars in expenses.
Medical insurance is expensive, but if it’s not offered through your work, you can consider using a high-deductible health insurance plan paired with a Health Savings Account (HSA).
A high-deductible plan qualifies you to have an HSA, which is a savings account with certain tax benefits that are used specifically to pay medical expenses.
Long-Term Disability Insurance
Long-term disability insurance is often overlooked, but it should be part of your overall financial plan.
Long-term disability insurance protects you if you can’t work for an extended period due to injury or illness.
More than one-in-four of current 20-year-olds will become disabled before they reach age 67.
If you were to get hurt or sick and you couldn’t work, you’d lose your income.
Your employer may offer long-term disability insurance, or you can buy it outside of your employer.
Dental Insurance
Dental insurance is typically separate from your health insurance policy. Your employer may offer it, or you can buy it independently.
There are different types of dental coverage.
For example, there are discount plans, where instead of your plan paying for part of your care, you get discounts on services when you visit a participating provider.
There are HMO dental policies where you pick a dentist as your primary care provider, and you don’t receive coverage if you get care out-of-network.
There are PPOs, so you can visit out-of-network dentists, but it’s cheaper to stay in-network.
Life Insurance
Finally, regardless of your age, it’s a good idea to think about life insurance. Life insurance pays a death benefit to your beneficiary when you die.
If anyone depends on you financially, it can be a good idea to get life insurance.
The cost varies based on factors like your age and health and specific risk factors.
Many people don’t see insurance as part of their long-term financial plan, but it’s just that. One financial emergency that’s not covered by insurance can lead to bankruptcy, which is why it’s important to be fully covered.w
