The 5 Basic Insurance Policies Everyone Should Have - Mint

When it comes to buying insurance, there are so many options on the market today that you might not know what?s necessary and what?s superfluous.

It?s important to be covered, but you can also be too covered. Paying for too much insurance takes money away from other areas, such as your emergency fund and your retirement savings.

When it comes to insurance, there are basically five types that everyone needs.

Health Insurance

This is the big one. In 2009, over 60 percent of all personal bankruptcies were related to health insurance costs.

When purchasing health insurance, consider the following:

• Needs: Young and healthy single people require less coverage than those with young families, the elderly, or those with chronic health issues. Do you plan on using your insurance a lot? If so, you?re going to want a low deductible and copays.
• Doctors: One of the first questions you should ask about a plan is if it allows you to keep your current physician.
• Cost: You can obviously only afford so much, so know what you can afford. Shopping for plans with higher copays and deductibles will save you money on your premium.

Car Insurance

Not only will you want car insurance, nearly every state requires that you have it.

For those with an older car, no more than the bare minimum may be required.

However, if you have a newer car or a car with a high value, you will also want to insure it against theft.

The main types of car insurance are:

• Liability: Liability coverage comes in two forms: bodily injury and property damage liability. These cover damage to others and their property. They do not cover the driver or passengers.
• Personal Injury Protection: This type of coverage will cover medical expenses related to driver and passenger injuries.
• Collision: Get collision insurance if you want your insurance to cover the cost of damage done to your car, whether you are at fault or not.
• Comprehensive: Collision only covers damage done in an accident. For example, if a tree falls on your car and destroys it, you?ll need comprehensive insurance to get compensation.
• Uninsured or Underinsured Motorist: This covers you in the event that the person who hits your car does not have enough insurance to cover the damage ? or any coverage at all.

Homeowner?s or Renter?s Insurance

Renter?s insurance covers you against damage or theft of personal items in an apartment. For urbanites, the low cost of renter?s insurance can be well worth the peace of mind that it provides.

Homeowner?s insurance is absolutely essential. It protects your most valuable asset against damage and theft.

However, sometimes homeowner?s insurance isn?t enough to fully protect your home.

Ask your insurance agent if you need additional insurance against flooding, earthquakes, fires and other disasters that might not be covered under standard plans.

Life Insurance

No one likes to think about it, but life insurance is an essential component of protecting your family in the event that you pass before your time.

There are costs associated with dying, such as burial and mortuary fees. Further, if you are the primary breadwinner, life insurance will help your family to offset the lost income.

The latter is the main reason that people get health insurance. The single and childless might not need life insurance, but everyone else should invest in a policy now.

Disability Insurance

Disability insurance is actually quite a bit like life insurance. It reimburses you for income lost during periods of time that you are not able to work.

As one third of all Americans are disabled at some point, having this insurance makes good financial sense for the single and married, parents and non-parents.

Disability insurance can cover permanent, temporary, partial and total disability.

No one knows what tomorrow might bring and disability insurance is relatively cheap ? far less than the cost of not having it if something goes wrong.

Five Unnecessary Insurance Policies

There are a number of insurance policies that most people probably do not need. These include:

• Flight insurance: Flying is one of the safest ways to travel.
• Life Insurance for Kids: Life insurance exists to replace lost income. Children have none.
• Accidental Death Insurance: Even the accident-prone should skip this insurance, which generally contains so many restrictions that it is nearly impossible to collect.
• Disease Insurance: A good health insurance policy is probably a far better investment than trying to cover yourself for every type of ailment out there.
• Mortgage Life Insurance: Another redundant form of insurance, a good term life policy will cover your mortgage in the event of your death.

Protect Yourself Without Paranoia

The urge to protect yourself against any calamity is understandable. Most people would rather pay a little bit of money every month rather than worry about coming up with a larger amount of money during a time of crisis.

On the flip side, some people might think that they have nothing to worry about. The five types of insurance identified in this article are general policies most everyone should have.

The five unnecessary types of insurance mentioned are policies that are uncommon and are most likely a waste of money.

Everything else falls somewhere in between: Some people definitely need certain policies (such as malpractice insurance), while some will never need others (flood insurance for a home on a hill in the Arizona desert).

?The 5 Basic Insurance Policies Everyone Should Have? was written by Nicholas Pell.

Source: http://www.mint.com/blog/planning/the-5-basic-insurance-policies-everyone-should-have-0113/

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