Types of Insurance Policies You Need & Those To Avoid

by Millie Kay G. on 2008-09-1229

What insurance policies should we own? From auto insurance coverage to health insurance and homeowner’s policies, we discuss what coverage to get and what we consider optional.

I’m starting to review my insurance options and whether I’m up to date with the amount of coverage I currently carry. What kind of policies do most of us need, and what type of insurance coverage may we overlook? Since an insurance policy is supposed to be our financial buffer in case of damage or loss, it’s a good idea to investigate our choices.

Generally, there are many online sites out there that can assist us by providing us comparisons, quotes and information on the type of insurance we should own. If you’re looking for insurance information, a good place to start would be to check out reputable sites like InsureMe.com, which is a highly popular comparison insurance site. They’ll recommend policies and match you with an insurer who addresses the requirements you provide. If you’d rather work with a specific insurance company — one who advertises through mail or television may have already caught your eye — then you can just contact the company directly. AIG Direct, State Farm, Farmer’s and AllState are recognizable insurance companies you may wish to work with one-on-one.

insurance policies

That said, let’s take a look at the kinds of coverage we should all carry and those that we can just take a pass on (unless you’ve got a specific need).

Must Have Insurance Policies

Homeowner’s Insurance

When I went through the process of buying my house five years ago, it was imperative for me to find homeowner’s insurance. This protects my family in case of a disaster, like the tornadoes, ice storms, high winds, and other weather-related events that happen to strike my state. According to FEMA, property owners lose more than $8 billion a year to fire damage, so it’s worth it to find a good policy. A site like Insureme.com can help me get started with finding a quote for a new policy.

Renter’s Insurance

Back when I rented a house, I read the lease and understood that my landlord wasn’t liable for my belongings in the event of a disaster, so I checked around for renter’s insurance. I checked with several insurance agents and eventually decided on a policy like the one offered by State Farm Insurance. That way, if something happened to my rented house, I would’ve been able to recover from the hit.

Auto Insurance

In most places, you’ll need proof of auto insurance before you can renew the car registration tag. With so much competition for low rates, even drivers with less than stellar records can find a quote that won’t curl their hair. A site like Esurance can get you on the road with an auto insurance policy in a short amount of time.

Health insurance

Here’s something you shouldn’t be without: health insurance is such a critical need in this country, but the search for it can be overwhelming. A lot of people are fortunate enough to have health insurance through their jobs. For the rest of us, eHealthInsurance and similar sites offer a way to research the policies that are right for us. The rates will change depending on whether you need family coverage, maternity benefits, and other factors.

Life Insurance

Another type of insurance you’ll need to consider is life insurance. It’s crucial for your family to be able to continue paying the bills with or without your work income — and life insurance can replace that income in the event of your death. To start out a search, you can consult a local insurance agent (perhaps one you’ve already established a relationship with), or check out services we discuss in our article on how to buy low cost life insurance, which will seek out quotes from a number of insurers for you. On the other hand, life insurance for children seems expensive as most kids don’t provide income for their families (the occasional lemonade stand notwithstanding).

Disability Insurance

While most people have life insurance, they often forget about disability insurance, which would be great if you could get it at group rates. If you’re employed, you’ve got a good chance of carrying it for cheap. We’re more likely to be disabled in our lifetime than die, so this type of insurance comes very much in handy more than you’d expect. The down-side? If you’re self-employed or unemployed, it could be quite expensive to get.

Long-Term Care Insurance

Long-term care insurance is something we should all check out. As our family members age, they’re likely to face critical health needs and might even need the benefits of a nursing home or other care facility. It’s better for us to start planning for the expense now with long-term care insurance. The U.S. Office of Personnel Management has a good starting point to assist us with our research.

insurance products to avoid

Insurance Coverage To Avoid

Pet Insurance

I enjoy our cat and dog, but I’m not ready to make the leap to pet insurance yet. For the most part, they’re in good health and I’d rather budget for pet-related expenses and pay for pet care through occasional dips into our bank account. Is this policy really worth a $1 a day? I prefer to incorporate vet bills in my emergency fund savings program.

Travel Insurance

Since my urge to travel is minimal at best (thank you, high gas prices), I don’t see the need for travel insurance. But your circumstances may be different from mine: if you’d like to quite worrying about lost luggage or would like to insure certain valuables during your trip, then InsureMyTrip.com may help you. For the most part though, getting travel insurance may be overkill. Better yet, check your travel rewards card benefits to see if they offer this type of insurance for free!

Credit Life Insurance

What’s going to happen to my credit card balance after I die? I don’t want it to haunt my family after I’m gone, yet I’m not comfortable with the expense of credit life insurance. What to do? While I ponder that, here’s an interesting article from The Federal Trade Commission on this very topic.

Extended Warranties

Have you noticed that whenever you buy anything electronic the cashier wants to sell you an extended warranty? For big ticket items like a game console, the manufacturer usually offers a one year warranty anyway. If you’re shopping at a retailer like Best Buy, take into account the expense of the extended warranty and the cost of the item you’re purchasing before you plonk down the dollars for extra coverage.

Wedding Insurance

Finally, in case of rampaging bridezillas or other natural disasters, there’s wedding insurance such as the policy offered by WedSafe.com. I don’t think it’s worth the money. At any rate, I need not worry about this since it’s too late for me!

Do you have all the insurance you need?

Copyright © 2008 The Digerati Life. All Rights Reserved.

{ 27 comments… read them below or add one }

Aryn September 12, 2008 at 1:51 pm

I seem to be on a wedding insurance kick today! I bought the WedSafe policy for my wedding and it gave me piece of mind, especially since I live in earthquake country. When you’re spending $30,000, a $250 policy isn’t too much to ask to make sure that money doesn’t go to waste if your event is cancelled by a hurricane, earthquake, or tornado. Or, what if your venue closes? That happened to hundreds of brides in Los Angeles a couple years ago.

I’m sure the brides in Houston this weekend are either glad they have insurance, or are wishing they did.

plonkee September 12, 2008 at 1:53 pm

Travel insurance is often useful if you travel abroad. If you are from a country with socialised healthcare you probably need it, especially if you go to the US.

Silicon Valley Blogger September 12, 2008 at 3:14 pm

Very good points you guys make. Insurance in general, should be tailored to each person’s specific situation. If you live in a disaster-prone area, then wedding insurance can be worth the small amount you pay for it. Although I’d probably still would have chanced it with my wedding — if I were concerned about disasters, I’d try to time the event during a time when nature would be more cooperative. Of course, earthquakes could be another story (though in general, aren’t they rare? Unless you live in Japan?)

Plonkee — good idea on when you should consider travel insurance. My parents don’t have travel insurance and they do travel a lot. They have some kind of medical insurance that’s received most anywhere though…

Mary@SimplyForties September 12, 2008 at 5:14 pm

Years ago I worked at a car dealership and I can tell you that 50% of what you pay for credit life when you purchase a car is profit for the dealership. It offered a higher profit margin than any other product we sold, including the cars! Since the insurance carrier also has to make a profit, you can imagine how much you are overpaying! The selling point of credit life is to avoid burdening your heirs with your car payments in the event of your death. It’s much wiser to factor car debt into your life insurance than to purchase a separate credit life policy.

Youronlineguide September 13, 2008 at 5:01 pm

It is a good practice to get an insurance life however, you have to consider reviewing their policies and if they are legit or not. In my country, there are people who sell insurance so they make money. I mean, they don’t pay their member once they avail their compensation. Thanks for sharing this article.

debts.org September 15, 2008 at 3:05 am

I think anyone who travels to any country where medical coverage isn’t paid for by the state requires travel insurance. If you’re travelling with expensive equippment you should also get travel insurance.

Ian M September 15, 2008 at 6:47 pm

Wedding insurance? Ok, that seems a bit much doesn’t it?!?!?! Otherwise, I’d agree with your list (although we are debating pet insurance as our pets seem to be somewha accident prone.) Consider these stats for long term care insurance and make your own decision:

– 12 million people currently receive long term care
– 82% are cared for at home or in Assisted Living
– Only 18% are in nursing homes
– 39% of those needing long term care are aged 18-64

Betty September 15, 2008 at 11:02 pm

I think every people have different priority in picking insurance. Until now, I only have 2 type of insurance, health and life insurance. I’m thinking to take car insurance, but the good insurance payment is relative high. I know that you get what you pay…But for now it still out of my budget. So, I prefer to drive more carefully.

Six Wise September 16, 2008 at 3:28 am

thanks for sharing this information. it is just in time. somebody is offering me a travel insurance and at first it is the best thing to do and thanks to this post i will think about it more than 100 times

Nathan September 16, 2008 at 10:32 am

In regards to life insurance, I’m 33, single, no kids. At some point I will likely get married and have a spouse. I don’t plan on having kids.

Until I’m married and have someone else to consider, is there *any* reason for me to buy life insurance?

Adrian October 16, 2008 at 8:00 am

I found that Budget gave me a cheaper quote than Esurance.

Wawanesa October 28, 2008 at 12:31 pm

I think only health insurance and auto insurance are necessary for a young man like me. And maybe home insurance in case of fire or a catastrophe. But I don’t think travel or wedding insurance are worth buying. If something happens to me during a hike, health insurance will cover my medical expenses.

Krista November 11, 2008 at 12:50 pm

In response to Nathan’s post – You probably don’t need a life insurance policy now, since you have no dependents. However, if you don’t want your parents or family to cover the costs of your funeral (in the event of your death, of course), or any of your other final expenses, then a life insurance policy would benefit you there. Also, keep in mind that the longer you wait, the more expensive it will be. Most life insurance policies get more expensive as you get older.

JGVFinance November 24, 2008 at 8:47 am

Most people do not like to buy life insurance until something happens to them or to their families. But people who are very protective of their love ones and family will always make sure they are covered just in case he or she can no longer provide the financial necessities in life. These are responsible family people. And when you purchase life insurance just make sure you are getting the right one for you and your family’s financial protection.

William Murray November 29, 2008 at 10:00 am

This is an excellant outline of inusrance needs. What I would like to add is that each type of insurance carries with it its own set of rules and its on vocabulary and it is worth while to take a few minutes studying before you make your purchase decision.

Helene May 24, 2009 at 11:34 pm

Thanks for your submission to Take Charge of Your Health Care Carnival. This is a good summary of basic insurance types. I’m with you on the extended warranties. It might be less costly to just buy the new item then pay for all of these extended warranties. This just adds a lot to the price of the item that you are buying.

Chandler Auto Insurance July 31, 2009 at 12:21 pm

Helpful summary. Bundling policies with as few companies as possible is great strategy for reducing costs!

Jay Bibbs August 31, 2009 at 11:53 am

I think you are largely correct in saying that health insurance is overkill, but for some people it makes a lot of sense. Significant travel and health issues? In that case, it’s definitely worth looking into.

SR22 Insurance September 22, 2009 at 10:16 am

I thought I would chime in with a couple of comments about insurance.

As far as a life insurance policy something that people need to consider before buying a term life policy is that if you are the bread winner in your family and you suddenly die it is typically recommended that your life insurance policy be equivalent to 10 years of your net take home pay.

For example if you take home $30,000 a year, then you should consider purchasing a life insurance policy with a value of $300,000.

As far as auto insurance or for that matter any insurance needs in general I strongly recommend that when people are going out and getting individual quotes from various insurance providers in their area that they let the insurance agent know ahead of time that they are in the process of getting multiple quotes from different insurance providers in their area.

By doing that you stand a better chance of receiving the company’s lowest possible rates. You need to create an incentive for the insurance company to give you their lowest rates. If you don’t, they really have no reason to offer you their absolute lowest rates.

Yogi January 9, 2010 at 1:00 am

I think only health insurance and auto insurance are necessary for a young man like me. And maybe home insurance in case of fire or a catastrophe. But I don’t think travel or wedding insurance are worth buying. If something happens to me during a hike, health insurance will cover my medical expenses.

Eddy April 9, 2010 at 3:42 pm

Health and home insurance policies are probably the best deal for us right now. You’ll never know when accidents happen; just make sure that we’ve prepared for it.

Mark April 26, 2010 at 11:35 am

This is the first time I’ve heard about wedding insurance… it`s very interesting. Probably i`m from Russia – we don`t know what tornado is (of course i`ve seen on TV a lot of time, but not in life). Yes, we have about hundred insurance products in Russia, but not “wedding insurance”…

Tim April 27, 2010 at 7:27 am

Good tips here. Another tip is to avoid buying GAP insurance from the dealer. Call your agent. You can add it to your current policy for many times less than the dealership will offer. The last one we did was four times less than the dealer offered.

Abilene June 2, 2010 at 2:10 am

Travel insurance is often useful if you travel abroad. If you are from a country with socialized healthcare you probably need it, especially if you go to the US.

Kenneth Ford September 20, 2010 at 1:30 pm

I would agree with most of your points do in fact need those coverages. I would stay away from generic quote engine sites, and use actual broker sites or carrier sites, in order to avoid the 50 phone calls a day that using netquote would create.

Kamlesh October 7, 2010 at 7:21 pm

Insurance is one of the most needed yet hated financial tools mainly because it is linked with undesirable events. Nobody wants to think about negative situations and events after all!

Before we purchase any policies, we should review the need for other types of insurance (particularly the more esoteric kinds) such as senior car insurance, teen car insurance or even pet insurance.

Thanks for the information!

trade insurance February 20, 2011 at 8:23 pm

It is very important that you choose the right insurance according to your need and situation. Insurance should be tailored to each person’s need and situations in the way that the person get full coverage of it. I was not aware about the existence of wedding insurance! Any kind of insurance is great, but also requires proper planning.

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