While there are many specialized forms of insurance, these four are the cornerstones of personal financial security.
1. Auto Insurance
· What it is: A contract that protects you against financial loss in the event of an accident or theft involving your vehicle.
· Why you need it: It’s legally required in most places. It covers costly repairs to your car, medical bills for you and others, and legal fees.
· Key Coverage Types: Liability, Collision, Comprehensive, Personal Injury Protection (PIP).
2. Health Insurance
· What it is: A policy that covers a portion of your medical, surgical, and prescription drug costs.
· Why you need it: A single hospital stay can cost tens of thousands of dollars. Health insurance makes healthcare affordable and protects you from staggering medical debt.
· Key Terms: Premium, Deductible, Copay, Coinsurance, Out-of-Pocket Maximum.
3. Life Insurance
· What it is: A contract that provides a financial payout (a death benefit) to your chosen beneficiaries when you pass away.
· Why you need it: It provides for your loved ones after you’re gone. It can cover funeral costs, replace lost income, pay off a mortgage, or fund a child’s education.
· Main Types: Term Life (affordable, lasts for a set period) and Whole Life (more expensive, includes a savings component and lasts your entire life).
4. Homeowners/Renters Insurance
· Homeowners Insurance: Protects your home’s structure and your personal belongings against damage or theft. It also provides liability coverage.
· Renters Insurance: Protects your personal belongings inside a rented property and provides liability coverage. Your landlord’s insurance does not cover your stuff.
· Why you need it: It’s essential for rebuilding after a disaster like a fire or storm. For homeowners, it’s often required by your mortgage lender.
