What Types of Insurance are Available?

You may understand that you need insurance as part of a successful financial plan, but have you figured out what kind of insurance you need? The options are overwhelming—flood insurance, earthquake coverage? Does your pet need health insurance? When is title insurance required? And what the heck is inland marine protection?

Insurance is an incredibly jargon-heavy business, laden with vocabulary you may have last seen on the SATs. Aside from explaining the “dull” stereotype the industry receives, it also complicates issues for consumers, particularly when determining what policies are necessary and which are simply excessive.

Here is a simplified guide to the various types of insurance policies available.

A health policy is probably the type of insurance you are most familiar with—it is intended to protect you against medical costs. In exchange for a premium, your insurance provider agrees to cover all or some of the cost of routine and emergency medical procedures, ranging from your standard checkup to a burst appendix. Dental insurance, a separate type of health coverage, applies to dental procedures only. This is generally considered as one of the most necessary types of insurance.

Life insurance is typically purchased by someone in order to provide for their dependants financially should the policy holder die. The benefit can be used to replace lost income (particularly important if the deceased was a key financial provider to the beneficiaries), burial and funeral expenses. In some cases, life coverage can be “cashed out” by the policyholder prior to death for a portion of the full value.

Disability coverage provides financial protection should the policyholder be injured or experience severe illness, rendering him or her unable to work. This type of insurance is often purchased by the primary breadwinner of a family in order to protect dependents. Policies typically payout a monthly stipend that replaces a portion of the disabled person’s income. Workers’ compensation is a specific type of disability insurance, offered by employers, to protect from loss due to a work-related injury.

Property/casualty insurance is a huge business because it encompasses so much. The property aspect protects you against loss from risks associated with a variety of types of property—houses, cars, boats, businesses—you name it, there’s probably a policy for it. Casualty refers to coverage in the event of an accident, most often associated with said property—car accidents, theft, someone injured in your home.

There are many more types of insurance available, but these are four of the most common kinds you will probably experience. Consider your personal needs and decide which policies will fit best into your financial plan.