There are different types of insurance, which are very much helpful especially in times of need. Thus, it is important that you are well-aware of your options when it comes to this matter. At the end of the day, having insurance is nothing but good for you.
Allow us to make this clear – first and foremost – having insurance does not spare you from getting sick, or from encountering unfortunate events. What insurance does (depending on the type) is to help you or your family start a new life should the unlikely happen, or help you go through such a painful time should sickness arise.
If there is one thing we are sure of – that is, having insurance is like having a backup plan, a life-saver.
According to a data published by the Insurance Information Institute, in a report by S&P Global Market Intelligence, it says that the insurance industry in the United States have “net premiums written totaled $1.22 trillion in 2018, with premiums recorded by property/casualty (P/C) insurers accounting for 51 percent, and premiums by life/annuity insurers accounting for 49 percent”.
Furthermore, it has been found that in the same year, P/C insurance primarily consisted of auto, homeowners and commercial insurance with “net premiums written for the sector totaled $618.0 billion”.
Meanwhile, the life/annuity insurance sector consists of annuities, accident, and health, and life insurance has net premiums totaled at $600.6 billion.
Now, in a different report from the United States Census Bureau, it says that in 2018 alone, the percentage of people with health insurance coverage was 91.5 percent. Unfortunately, a little lower than the year before that, which was then at 92.1 percent. Meanwhile, in the same year, it was recorded that 8.5 percent of people or 27.5 million people did not have health insurance at any point during the whole year.
If you come to think about it, the numbers are actually great compared to other countries. However, we cannot deny the fact that there are still individuals or families that are not insured – in any way. And to be honest, having no insurance at all especially if you have your own family is disastrous.
You see, we do not know what lies ahead. We do not know what’s going to happen from this moment to the next. Life is unpredictable. Nature is unpredictable. Everything is unpredictable. While we cannot change what’s meant to happen, we can prepare for it by making sure we are insured.
It’s probably safe to say that having insurance – whether it be health, life, or any other types of insurance – is a must-have in anyone’s life. All the more – as we earlier mentioned – if you have a family that is dependent on you or you have young children.
Having said that, we are going to talk about the different types of insurance today. This aims to hopefully open up your mind, at the same time, make you knowledgeable of the different insurance there is for you – depending on your needs, and on the kind of state of life you are at.
But before tackling some of the most common types of insurance, we are going to answer a few commonly asked questions first. In particular, we are going to answer the following:
- What is insurance?
- Why is having insurance important?
- What happens when you do not have insurance?
- How much does insurance cost?
… and of course, the most important of all
- What are the different types of insurance?
- How do you know the right type of insurance for you?
WHAT IS INSURANCE?
According to the Consumer Financial Protection Bureau of the United States, “insurances a way to manage your risk. When you buy insurance, you purchase protection against unexpected financial losses. The insurance company pays you or someone you choose if something bad happens to you.”
Meanwhile, an insurance policy refers to a written contract between a policyholder (which refers to the person or company that gets the policy) and the insurer (referring to the insurance company).
To put it simply, insurance is a person’s protection from any financial loss. It is a form of risk management, which is first and foremost, used to hedge against the risk of an uncertain or contingent loss.
WHY IS HAVING INSURANCE IMPORTANT?
Being insured is important because it helps make sure that you are financially able or secure should face certain problems in life. It is a very important aspect when it comes to financial planning as to when the need arises in a very uncertain time, you will not have to worry because you have your insurance to help you get through.
For instance, your house was burned. While it may be heart-breaking, the less painful it will be if your house was insured, because the insurance company will pay for the damages, which will be a great help as you start anew.
The same thing happens when you get sick. You do not have to worry about financial requirements because you have your health insurance, which normally covers a lot of different kinds of diseases.
WHAT HAPPENS WHEN YOU DO NOT HAVE INSURANCE?
As we have mentioned earlier, not having insurance especially if you have family members who are dependent on you is a disaster. It’s not an ideal situation to be in, and we bet you do not want that to happen, right?
Here are some examples, if something unfortunate happens to you, and you do not have life insurance, and say you are the breadwinner of the family, the family that you will leave behind will surely have a hard time getting their life back after their loss.
Another example, for instance, you have a car and you do not have car insurance. If you get into a crash, you will have to spend on the restoration of your car, and all the other expenses needed for it.
If you do not have health insurance, then, that means you will have to cover for all the tests and medications plus the doctor’s fee and all should you get sick.
You see, having insurance is not just a want or a luxury, it is a need. Everyone should have at least one, so in case the unlikely happens, you and your family are secured.
HOW MUCH DOES AN INSURANCE COST?
As we have said, there are different types of insurance available. When it comes to how much you’re going to spend on getting insurance, it actually depends on the type of insurance you are planning to have. In the next few paragraphs, we are going to share with you the different types of insurance, at the same time, how much you are expected to spend on getting one.
WHAT ARE THE DIFFERENT TYPES OF INSURANCE?
Again, there are so many different types of insurance out there – depending on your needs. However, we came up with a list of the most commonly acquired insurance. These, too, are what we find as what every person has to have.
Before we talk about our list of major types of insurance you must have, you may want to check this video by One Big Happy Life wherein they talk about seven different types of insurance and why you need them. Click the play button to watch the whole thing.
Life insurance is very common. We actually consider this as a must-have type of insurance.
The greatest reason in having or acquiring life insurance is to ensure that should something unfortunate happens to you, the people you will leave behind are well-provided.
Life insurance is extremely important for those who have families that are dependent on their salaries to pay the bills.
Most industry experts suggest a life insurance policy must cover “ten times your annual income”. The sum would provide enough money to cover whatever existing expenses there are — plus funeral expenses (yes, that’s part of the reality of life insurance), and also, it gives your family a financial cushion that will help them re-group after losing you.
When estimating the amount of life insurance coverage you need (although you can have your trusted financial expert handle this for you), make sure to factor in not just the funeral expense, but also mortgage payments, as well as living expenses such as taxes, loans, and credit cards. Also include child care as well as college costs if you have children.
Life insurance is actually broad. It comes with sub-categories, which referred to as Term Life and Whole Life.
Term Life basically refers to the policies that last for a specific period of time — typically 10, 20, 25, or 30 years. Once the term runs out, the coverage automatically expires as well. Since this type of life insurance has an expiry, term life policies can offer more coverage for lesser money in premiums.
Meanwhile, Whole Life refers to policies that last for the rest of your life. Apart from the death benefit, insurance companies also accrue a separate cash value over time. As compared to Term Life, this type of life insurance is actually more costly.
Just like life insurance, health insurance is also a very common type, and also a very essential insurance every person should have.
This is one of the most highly recommended types of insurance from among insurance experts. Well, it’s logical because sickness is inevitable in this life. In fact, in some people, it happens every so often. With medical costs increasing year after year, having health insurance is definitely a need.
When it comes to costing, to be honest, healthcare, in general, is costly, and so is health insurance. It can actually be quite difficult to find affordable health insurance these days — especially if you have a pre-existing medical condition or a health condition that you’ve had ever since you were born, or if you are unable to access health coverage through your employer.
As we said earlier, it is best to consult with a financial advisor or financial expert to help you determine the right health insurance for you.
Just so you know, in 2010, Congress passed the Affordable Care Act, which means health coverage has been required by federal law.
To give you an idea, here’s how it works:
– Premiums, which means you will have to pay regular payments to keep your policy working.
– Copayments, which means, every time you go visit a doctor or you get a prescription from the doctor, your plan may require out-of-pocket fees, which normally ranges from $10 to $60.
– Deductibles, which refers to the amount of money you will have to spend out of your own in a particular year before your insurance policy started paying off for you.
Meanwhile, here’s what you will get from having health insurance:
– You will no longer have to worry about paying the doctor, hospital, or the pharmacy. All of them will just have to bill to your insurance company, except for copay and deductible. For as long as the expense is covered by your insurer, they should pay.
– You will get peace of mind of not having to worry about health-related expenses.
Auto insurance is another major type of insurance. Well, who doesn’t own a car, anyway? It’s more than just want these days. It’s considered as a necessity.
Anyway, here’s an interesting yet alarming fact — in 2009, according to data released by the Fatality Analysis Reporting System (FARS), there were over ten million accidents in the country. Of all the accidents recorded, 33,808 people died because of motor vehicle crashes.
While having a car is a necessity, it actually poses a threat to human life as well. You know, the reality of life is, even if you try so hard to spare yourself from accidents, sometimes, they just happen. If they do, the question is, are you ready for it?
Having auto insurance or car insurance is actually required by the law, which means, if you are going to buy a car, you must also buy auto liability insurance coverage. Otherwise, you won’t be allowed to drive your car.
How much car insurance or auto insurance cost actually depends on the coverage. However, for an auto insurance policy, this must include:
– Liability – To protect other drivers should you cause them a wreck that damages their car and then lead to health care bills.
– Collision – This is to help protect your own car if you cause a wreck on it.
– Comprehensive – To protect your car’s value from unforeseen cases like theft, weather damage, and other events that happen outside the highway.
– Other Coverage – This depends on you — you can opt to include medical coverage for instance on top of whatever health benefits you have but this particularly focused on whatever you acquired because of a road mishap.
There are so many auto insurances out there. In fact, you can buy one online. You just have to check for the possible option by reading reviews or asking around.
A lot of us are doubtful if we will ever become disabled in our lifetime. Thus, we hardly consider taking or spending on disability insurance coverage.
The reality, however, is that according to studies, three in every ten workers will become disabled before they even reach their retirement age. In addition, twelve percent of the population is actually currently disabled, and that almost fifty percent of these disabled people are of working age.
You see, life is unpredictable. No one can really tell. Thus, we better be ready for whatever life will throw at us.
There are two types of disability insurance — the Short-Term Disability, and the Long-Term Disability.
The Short-Term Disability usually kicks in two weeks after a qualifying injury or illness. This pays for a few months or the longest possible is for a year.
Meanwhile, the Long-Term Disability typically starts after a 90-day waiting period and can replace part of your income for a couple of months, years, or even up to your retirement age.
Ideally, the latter is the best option especially if you are working on a high-risk profession like engineers, architects, factory workers, etc.
Homeowners insurance is one of the many different types of insurance available. This, however, is a form of property insurance. This covers losses and damages to an individual’s residence, including furnishings and other assets inside the home. This type of insurance also provides liability against accidents in the home or in the property.
While there is no existing law that requires you to buy a homeowner’s insurance policy, mortgage companies, however, usually does.
Since your home is possibly one of your biggest, if not your biggest investment, it is highly recommended that you buy an insurance policy that covers it should the unlikely happen.
Normally, you will have to pay for premiums. The average premium for a homeowner’s policy is around $1,000 to $1,500 every year. As with deductibles, before the policy pays for the fixing of your home, you will have to spend to your deductibles first.
When the unlikely happens, you will get claims from your insurance company. This covers repair or replacement of your home’s structure, as well as any other building within your property. This also includes replacement of your personal belongings — whether they are damaged, destroyed, or were stolen. Of course, having homeowners insurance will give you peace of mind knowing that should anything happen to your property, you can easily start over because you have your insurance to cover expenses for you.
FINAL THOUGHTS OF TYPES OF INSURANCE
In this life where everything is unpredictable and mostly out of our control, we better be ready. Good thing there are insurance companies that we can rely on, making sure to ease things up should the unlikely happens whether it be on you, your home, your car, or anything else (as long as there is insurance coverage for whatever it is).
Have you bought yourself insurance yet? Come to think of it, should anything happen, are you prepared?
While saving up is a good thing, having insurance is still the best thing you can ever have.