What Can Be Insured? A Guide to the Most Common Types of Insurance

Insurance policies provide financial protection and peace of mind in the event of unexpected losses. There are many different types of insurance available to cover a wide range of needs. Here is an overview of the most common forms of insurance that individuals and families may want to consider purchasing.

Auto Insurance

Auto insurance is mandatory in most states and provides financial protection for your vehicle in the event of an accident, damage, or theft. The three core coverages of an auto policy include:

• Liability insurance – Covers injuries or property damage you cause to others in an accident where you are at fault. Required in most states.

• Collision insurance – Covers damage to your vehicle from an accident, regardless of fault.

• Comprehensive insurance – Covers non-collision damage such as theft, vandalism, fire, flood, hail, or animal strikes.

You may also want to consider optional coverages like:

• Uninsured/underinsured motorist coverage
• Personal injury protection
• Roadside assistance
• Rental car reimbursement

Homeowners or Renters Insurance

Homeowners insurance provides financial protection for your home and belongings. It typically includes:

• Dwelling coverage – Pays to repair or rebuild your home if damaged or destroyed.

• Personal property coverage – Replaces stolen or damaged items like furniture, appliances, clothes, and electronics.

• Liability coverage – Covers injuries or property damage to others caused by you, residents, or your pets.

• Additional living expenses – Pays for temporary accommodations if your home is unlivable due to a covered loss.

Renters insurance provides similar protections for renters or condo owners. Make sure to get a policy that meets your state’s minimum liability coverage.

Health Insurance

Health insurance helps pay for medical expenses like doctor visits, hospitalizations, prescriptions, and more. There are several main types of plans:

• HMO – Requires choosing a primary care doctor and getting referrals to see specialists.

• PPO – Allows flexibility to see any in-network provider without referrals.

• High-deductible health plan (HDHP) – Has lower premiums but a high deductible you must meet first. Often paired with a health savings account (HSA).

Consider the premium cost, deductibles, copays, providers covered, and whether the plan meets your expected medical needs when choosing a policy.

Life Insurance

Life insurance provides a death benefit to your beneficiaries if you pass away. The main types are:

• Term life – Active for a set period like 10 or 20 years. Ideal for covering temporary needs like replacing income for dependents.

• Permanent/whole life – Coverage for your entire life. Accumulates a cash value fund you can borrow against. More expensive than term.

The amount of life insurance you need depends on factors like income, debts, dependents, and goals. Aim for 10-20x your annual income in term coverage.

Disability Insurance

Disability insurance replaces a portion of your income if you become too injured or ill to work. Policies may cover:

• Short-term disability – Replaces income for injuries/illnesses lasting less than 2 years. Often an employee benefit.

• Long-term disability – Benefits kick in after 90 days and replace income for extended disabilities. A must-have coverage.

• Business overhead expense disability – Covers ongoing business expenses during the owner’s disability. For small business owners.

Calculate 60-80% of your monthly take-home pay and look for a policy close to that amount.

Long-Term Care Insurance

Long-term care insurance pays for extended custodial, nursing home, or at-home care services if you become unable to care for yourself independently.

This type of policy helps cover high long-term care costs instead of depleting your retirement savings. It provides benefits for ADL services, home health aides, adult daycare, assisted living facilities, and nursing homes.

Purchasing in your 50s to early 60s provides the best balance of affordability and adequate coverage duration.

Professional Liability Insurance

Professionals like doctors, lawyers, accountants, and consultants need liability coverage to protect against claims of negligence, errors, or omissions. These policies cover legal defense expenses and any settlement or judgment costs awarded to the plaintiff:

• Medical malpractice – Covers physicians and healthcare organizations against medical negligence claims.

• Attorney malpractice – Protects against allegations of inadequate legal service, errors, or failing to adhere to standards of care.

• Accountant liability – Defends against claims of substandard accounting services or advice.

• ** Directors and officers (D&O)** – Protects corporate directors and officers from claims alleging wrongful acts on the job.

The amount of coverage needed depends on your profession’s risks and liability exposures.

Business Insurance

Several insurance policies help protect businesses against losses:

• Property insurance – Covers damage to company buildings, equipment, furniture, inventory, and other physical business property.

• General liability – Protects against 3rd party bodily injury or property damage claims arising from your business operations or products.

• Business interruption – Replaces income lost due to suspended operations from property damage.

• Cyber insurance – Covers costs related to data breaches, hacking incidents, cyber extortion, and digital asset loss.

• Errors and omissions – Protects against claims of inadequate work or negligent actions that cause a client financial harm.

• Workers’ compensation – Pays for medical care and lost wages for employees injured on the job. Mandatory in most states.

Specialty Insurance

Some individuals and businesses may benefit from specialized insurance policies such as:

• Flood insurance – Covers flood damage not included in standard homeowners or business property policies. Required for high-risk flood zone properties with federally-backed mortgages.

• Earthquake insurance – Pays for earthquake damage to your home or business property which standard policies exclude.

• ** event insurance** – Protects against financial losses from event cancellations, property damage, and liability claims. Useful for concerts, conferences, and other large events.

• Pet insurance – Helps pay veterinary bills for sick or injured pets, including accidents, illnesses, surgeries, prescriptions, and hospitalization.

• Travel insurance – Typically, a bundle of trip cancellation, interruption, delay, medical, baggage, and emergency medical transportation coverages.

• Jewelry, art, or collectibles insurance – Protects valuable personal collections against covered perils like theft or damage.

Final Thoughts

There are numerous insurance solutions available to transfer risk and provide financial protection from life’s unexpected losses. While no one needs coverage for every scenario, most people benefit from securing core policies like auto, health, homeowners or renters, life, and disability insurance.

Consulting with an insurance agent or financial advisor can help you review potential gaps and determine the right insurance coverage for your specific situation. Be sure to shop around and compare multiple quotes to find competitively-priced policies.