The Importance and Descriptions of Insurance

by Guest Post

in Keep It Organized

We all know that we need to have insurance, but which ones do you really need? What will they cover? Here is a list of the different types of insurances and what each of them provides…

Health Insurance

Health insurance is useful because it can keep an individual from having to drain their savings in the event of a health problem like a heart attack or car accident. Health insurance can provide for doctor’s visits, routine procedures, surgeries, hospital visits, and prescription drugs. Health insurance is one of the few insurances that I would consider necessary unless you are independently wealthy… just one hospital stay could easily wipe you clean otherwise.

My husband and I receive health insurance through his job as a school librarian. We have opted for a high deductible plan, so we may have to cover up to $7500 out of pocket in a single year but our premiums are manageable. We just make sure to keep $7500 in cash around in case.

Disability Insurance

Smart woman checking off her list!

Disability insurance provides for the income of an injured party if they can’t work due to an injury or disability. Disability insurance is important to have if you will need to have some source of income to pay your bills should you become incapacitated. Health insurance will pay for medical bills but will not cover the rest of your expenses. Disability insurance will provide an income stream during these times.

My husband has disability insurance that will cover 75% of his income if he is ever disabled for more than 45 days. We keep an emergency fund stocked with 3 months of his income to cover that layover. I had disability insurance with my old job, but have not signed up for any yet now that I am self employed. I am looking into it now.

Life Insurance

Life insurance helps to cushion the financial blow from the death of a loved one. It provides a death benefit to the beneficiary’s of the insured party. These benefits can be used to replace the lost income and provide for burial and funeral expenses. Life insurance is absolutely vital for any family that would be impaired by the death of a family member.

Since my husband and I do not have debt other than the mortgage, we each only have a $100,000 life insurance policy. That would be enough to cover the rest of our mortgage, a funeral, and about a year of necessary expenses. If we have kids, we will be raising our policies significantly, but we each make enough to live on, so we don’t need as much coverage as most families.

Automobile Liability Insurance

Happily insured family!

Automobile insurance is designed to protect against costs from an accident. Liability insurance specifically covers the damages to individuals or to personal property that you would have to pay for. All fifty states in the United States require that drivers have automobile liability insurance to protect in the event of an accident. Automobile lenders will require comprehensive coverage to protect their ownership interest in a new automobile. Comprehensive coverage would cover your liabilities to others as well as any damages to your own car or self in case they are not covered by whomever caused the accident.

My husband’s Prius is paid off but still worth more than $10,000, and he drives more than 15,000 miles a year, so we continue to have comprehensive coverage on it. But my Aveo is paid off, I drive less than 4000 miles a year, and my car is only worth around $4000, so I have chosen to only have liability insurance.

If you have taken the time to put into place all the insurance listed above, you will be very secure. This insurance is a vital step in financial stability for your family. Take it one step at a time and check them off as you go.

What other insurances do you think are important?

Crystal Stemberger is the creator of Budgeting in the Fun Stuff, a personal finance blog about saving for the future, paying the bills, and budgeting in a ton of fun along the way.

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