The Five Types of Insurance Everyone Needs
The right kind of coverage is an essential part of a solid personal financial plan.
While there's no way to predict what unforeseen events will impact our lives in the future, the right insurance plans can help provide financial protection. "Insurance, regardless of what you're protecting, is a promise that if something unexpected happens, you are made whole again financially," says Jessica Lepore, founder of Surevested. "We can never be truly prepared for the unexpected, however, having insurance gives you the peace of mind that if something happens beyond your control, you can get back on your feet as soon as possible."
With all the different types of insurance available, Lepore says deciding which policies are essential can be tricky. "The best way to determine what type of policies you need is to do something I like to call a 'your world' analysis," she explains. "Simply put: Ask yourself what things in your world are the most important to you (and that you need to protect financially), and remember that depending on what stage of life you are in, the things that are most important to you might change over time."
Curious what kinds of insurance policies are crucial to creating a solid personal financial plan? From life insurance to long-term disability insurance and more, Lepore breaks down five types of coverage that no one should do without.
While we can't control the emotional repercussions of losing a loved one, Lepore says a good life insurance policy can help relieve some of the financial burdens. "Life insurance is a policy that pays out a predetermined sum of money in the event of the policyholder's death," she explains. "Beyond covering any final expenses, life insurance can guarantee your family can continue to live in their home, pay off any debts you might have had, and even guarantee your children's future."
Having adequate health insurance coverage is essential to your continued health and welfare, and crucial to maintaining your financial well-being as well. "Out of pocket costs from medical bills, such as routine check-ups, unexpected hospital visits, or surgery, are very expensive," explains Lepore. "No matter what age or stage of life you are in, medical insurance is critical to have in order to help cover those costs without major financial repercussions."
Homeowner's or Renter's Insurance
Make no mistake about it: Whether you own a home or rent an apartment, Lepore says insurance protection is essential. "Homeowner's and renter's insurance can protect you from both physical and liability damages that occur to you or things in and around your home," she explains. "Unexpected events, such as a fire, theft, or water damage, can leave you with large bills that add up quickly, and without insurance protecting your home, you would be responsible for paying for those repairs, materials, and in some cases, replacing your property."
Automobile or car insurance is a policy that protects you from financial loss if you are involved in an auto accident. "Much like other insurance policies, there are many layers and options of protection that range from basic mandatory liability protection to protection that covers physical damage and unexpected events like theft," she explains. "Anyone who owns or leases a car must have some type of auto insurance, and depending on which state you are in, the limits of protection that are mandatory vary."
Long-Term Disability Insurance
Long-term disability insurance provides a replacement of income in the event that the policyholder becomes disabled—from something such as an injury or illness—and can no longer work their current job. "It is a great option for someone who understands that they, or their family, couldn't financially rebound if they suddenly were no longer able to physically work," she explains. "The most flexibility for long-term disability is with how long the policy would provide partial income replacement, which could be for a couple of months or as long as up to retirement and beyond."