There are many different types of insurance, but they all generally ensure one thing – that you have money to claim in the events covered by your insurance policy. Because there are so many different insurances, some are more important than others. Some insurance plans are important and even mandatory to have, while others you’ll probably never need.
In fact, nearly anything can be insured, given context. For example, did you know that major music festivals can take out “Non-Appearance Insurance” in the event a concert needs to be canceled because the performer became sick?
So you might not need to insure your birthday party against Lady Gaga’s arrival, but you absolutely need the three insurance policies we’re going to list.
Driving without auto insurance is a really dumb idea, not only because it is entirely illegal, but also because vehicle insurance claims can reach staggering amounts. Imagine needing to pay $2,000 out of pocket for a minor fender-bender accident!
In fact, the Insurance Information Institute reports that the average loss per claim for car insurance is around $4,900. Laws vary by state, but in most states, significant penalties and fines will be leveraged against you for driving without insurance, on top of paying out of pocket for damages.
Thus, it’s crucial to know how to get car insurance before buying a car, and the different options available. Auto insurance options include:
- Liability coverage: Covers the cost of any injuries or property damage caused by an accident that was your fault.
- Collision coverage: Covers the cost of repairs or vehicle replacement if a vehicle is significantly damaged beyond repair.
- Comprehensive coverage: Covers other events not related to wrecks, such as vandalism and theft of your vehicle, or theft of items inside your vehicle like the stereo, GPS navigation system, etc.
Medical emergencies can strike at any time, and depending on the medical emergency, can cost hundreds of thousands of dollars in medical expenses. For example, a single day on an ICU bed with a ventilator can cost $10,000, as you get billed for everything from the bed linens to the jello puddings.
According to the Kaiser Family Foundation, nearly half of all bankruptcies are related to medical debts. Even if you’re a perfectly healthy individual, a fall down the stairs and treatment for a broken arm at the hospital will start at around $2,500.
Health insurance isn’t too hard to figure out, and many people opt for high-deductible health insurance plans along with a HSA (Health Savings Account). These plans give you a lower monthly premium but mean you’ll pay a bit more upfront for healthcare costs.
An HSA is a savings account with tax advantages, and it is used specifically for paying medical bills. Your HSA contributions can be deducted from your taxable income, up to $3,400 for singles and $6,750 for married couples. The money will also be tax-free when it is withdrawn for payment on medical expenses.
Homeowners and Renters Insurance
Homeowners insurance is a good thing to have, it’s just a matter of knowing what kind of coverage you need. Many home insurance policies actually exclude flood insurance, which is different from water backup protection, but it’s actually mandated by the federal government that homes in high-risk flood areas are protected by flood insurance if they are backed by a federally regulated lender.
Renters also have insurance options that are worth consideration. Renters insurance can replace your items that are damaged in a fire, or if you’re a burglary victim.