Do you ever ask yourself questions? “Self, what type of insurance do I need?” It’s a legitimate question that we all should ask on a regular basis. We should also question whether we have adequate coverage.
Most families need at least five and sometimes more different types of insurance. Here are the different types of insurance that we all need: health, home, auto, renters, term life, disability, umbrella, identity theft, and long-term care insurance.
What Is Insurance
Insurance is not a scam or a ripoff. It’s simply a way in which we can pay someone else to assume some of the risks of our everyday life.
We all face risks in various areas of our lives. Allow me to provide an extreme example.
It’s possible that I could be killed by an asteroid falling to earth. I live on earth. Asteroids are actual things. It’s possible, although remotely, that I could die from an asteroid smashing me like a bug.
I am willing to assume that risk. Why? Because although it’s possible it’s highly improbable.
Insurance is a way for us to transfer risk to a third party. Companies complete complex mathematical calculations to determine the probability of something happening. They then assign a dollar amount to that event.
What Type of Insurance Do I Need — Health Insurance
Health insurance is a drag on 100% of families in the United States. It’s expensive and rarely is it customizable. However, we all still need it.
Many employers offer health insurance. Some of it is good and some of it bad. Often, it’s going to be “you get what you get.”
How To Hack Health Insurance
The biggest hack of all is to stay healthy. Eat the apple a day. Get off the couch and get moving. Ban fast-food and sugary drinks from your house. Design a plan to live at the ideal weight for your size.
Having a health savings account is one of my favorite health insurance hacks. For many years we purchased the policy with the lowest deductible. Those plans are the most expensive.
Eventually, we switched to a high-deductible plan with a health savings account. The premiums were considerably lower. We invested the difference into our health savings account. My employer occasionally will make contributions to the plan as well.
We now have enough saved in our account to cover our deductible and any potential coinsurance situations for a couple of years.
Here’s an article about saving money and one of the ways is raising your deductible.
Health Insurance Outside of Your Employer
Employers subsidize health insurance which drives down the cost. Prepare for sticker shock when looking for coverage outside of an employer. I recommend calling a few agents and discussing your needs. Perhaps you can find a policy that’s semi-affordable.
Non Traditional Heath Insurance Coverage
Take advantage of any government-sponsored health care plans if needed. There should be no shame or embarrassment. Everyone needs help at some point.
Companies such as MediShare offer affordable coverage. It’s not insurance but a cooperative of sorts. It’s an interesting concept. My wife and I used it when I was on a sabbatical. The coverage is comprehensive. It’s worth investigating.
What Type of Insurance Do I Need — Home Insurance
Banks require home insurance when mortgages are involved. That covers their interest and mitigates their risk.
You will need adequate insurance to rebuild in the case of total loss or to repair the damage that’s beyond your cash reserves.
We live in a HAIL ZONE in Illinois. Every house in our neighborhood suffered hail damage on the siding and shingles. New siding cost about $18,000 and a new roof was $16,000. I paid my deductible and a little bit more out of pocket (insurance companies…). I didn’t pay anywhere near the $34,000 that the insurance company paid.
It’s best to raise the deductible high enough to provide some premium relief. However, be sure that you have adequate cash to pay the deductible.
I’ve been buying insurance coverage since Ronald Reagan was president. My recommendation is to steer clear of any insurance company that has a great commercial on TV. Why? Those spots are not cheap and someone is paying for them — and that is you.
Auto Insurance
Auto insurance is regulated at the state level. Some level of auto insurance is required in forty-eight of the fifty US states. The only two states that do not require auto insurance are Virginia and New Hampshire. Even if auto insurance is not required I would never recommend passing on it.
How much coverage you need and what types are up to you, for the most part. Banks require adequate coverage when there is a loan involved.
Don’t skimp on auto insurance. Obtain larger than state-required minimums if possible. Extra coverage is typically a great value.
State minimums are quite low. Most insurance companies begin coverages at higher levels.
Do your homework, count the cost, and transfer the risk.
Insurance Company Recommendations
I personally use Auto-Owners Insurance. In the past, I’ve used some of the big boys but will never go back.
| Company Name | AM Rating | States Covered |
| Auto-Owners Insurance | A++ | AL, AZ, AR, CO, FL, GA, ID, IL, IN, IA, KS, KY, MI, MN, MO, NE, NC, ND, OH, PA SC, SD, TN, UT, VA, and WI |
| Erie Insurance Group | A+ | IL, IN, KY, MD, NY, NC, OH, PA, TN, VA, WV, WI |
| Cincinnati Insurance Companies | A+ | CA, CO, CT, DE, DC, HI, ME, MT, NV, NH, NJ, OR, RI, VT, WA, WY (many more states as well) |
What Type of Insurance Do I Need — Renters Insurance
If you are renting a house, condo, apartment, or any other place then you must have renter’s insurance. Policies are affordable. Your landlord’s insurance policy does not cover your contents.
Apartment fires and tornadoes happen every day. It’s not the landlord’s responsibility to insure your contents. Check with your insurance agent and get a policy ASAP.
You Need Term Life Insurance
Term life insurance is an inexpensive way to say, “I LOVE YOU!” to your family.
Employers often provide coverage at no cost that equals one year’s salary. You can usually buy additional coverage through your employer as well. Sounds like a great idea but there are some issues.
Employer coverage is a group policy tied to that employer. If you quit, get fired, or downsized then your coverage lapses.
A term life insurance policy purchased outside of your employer is portable. As long as you pay the premium you will have coverage. Where you work or if you work is irrelevant.
I know a person who only had work coverage. She was downsized and lost her job. When we attempted to get coverage outside of work she discovered that she was uninsurable. The sad truth is that she should have had coverage many years prior — outside of work.
Companies such as Ethos and Policy Genius have made obtaining insurance painless and affordable.
Who Actually Has Disability Insurance
A friend of mine became disabled. He had refused the long-term disability option during open enrollment for many years. “It’s just too expensive!”
When he could no longer work he asked me, “Who actually has disability insurance?” I sheepishly raised my hand.
Disability insurance is going to be a bit salty. It’s a vital piece to a strong financial plan though. There are two types: short-term and long-term.
Short-term disability insurance is designed to get a person through a relatively short issue (less than a year). Long-term disability insurance provides coverage for longer than a year.
In both situations, a set amount of your salary is paid during the time of disability.
What Type of Insurance Do I Need — Umbrella Insurance
Umbrella is a good idea when your net worth starts climbing above $1 million. For a few hundred bucks per year, you can obtain an “umbrella” policy that provides additional coverage over your home and auto in case of a lawsuit.
Talk you your agent for more information.
Do You Really Need Identity Theft Insurance
I personally don’t carry identity theft insurance. I have specific controls in place to guard my identity. If you are interested in obtaining identity theft insurance take some time and purchase from a reputable company.
Long-Term Care Insurance — A Better Way
Long-term care insurance is becoming exceedingly expensive. My recommendation is to live as healthy as possible and pack your health savings account to the max.
If you are able to obtain long-term car insurance from a solidly rated company at a decent then do it. Just don’t break the bank.
I dare you to profit!