Understanding the Different Types of Insurance Policies

Understanding the Different Types of Insurance Policies

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Insurance Policies are vital for individuals and the business. They help to ensure protection against eventualities in the future. No one knows what tomorrow holds, this is why it is wise to buy certain types of insurance policies so as to be able to withstand any unforeseen circumstances that might arise any time.

In this article, we will look at the four (4) common types of insurance policies

Types of Insurance Policies

  1. Health Insurance

Health, they say is wealth. One important type of insurance policy is the health insurance policy. It ranks high amongst other types of insurance policies. Research reveals that being admitted to the hospital for only 3 days incurs a lot of cost. This is why you need health insurance to offset such high hospital bills. As an employee in an organization, you could easily access health insurance through your employer but if your employer doesn’t have such plans, you could buy health insurance from health insurance companies. As long as you meet all the criteria of the company, you will  be placed on a plan. Remember, eligibility is key. Such eligibility test involves your statement of accounts. The insurance company would like to know how much you make on a monthly basis.

The major aim of health insurance policy is to subsidise hospital bills both home and abroad. The health insurance policy is also important for people planning to embark on a trip. This is because you could experience any health challenge any time. The health insurance policy makes health services easily accessible to you provided the country of your destination is covered in the insurance plan. Make sure to do your due diligence before engaging on a trip. If your destination is a blacklisted country, the health insurance won’t cover you.

  1. Auto Insurance

It is a crime in almost every part of the world to drive without an auto insurance. This ranks as number two on our list amongst the 8 most important insurance policies needed to man.

Apart from being a crime to drive without an auto Insurance policy, having an auto insurance safeguards you in situations like accidents, especially if it was your fault.  There are several kinds of car insurance policies that will cover you if you are involved in an accident that damaged the car or caused injuries. Here are some of them:

  • Liability Coverage

This type of car insurance pays for damages done to the car and injuries the accident caused in a case whereby you are to blame. In addition, it pays for your law suits, settlement and judgements in a case whereby you are sued because of the accident.

  • Under insured or Uninsured Motorist Coverage (UM)

It will interest you to know what if an Uninsured driver hits your car, this Coverage caters for the medical bills of everyone involved and also covers the expenses of the damage done to your car.

  • PIP also know as Personal Injury Protection

This Coverage does not care about who was responsible for the damage during an accident. It helps cover the expenses of the driver and passengers. In the case whereby you are injured and cannot perform your duty on your child or children, this insurance covers that and also help reimburse wages lost due to the inability to work.

  1. Home Insurance

While Auto insurance could be mandatory by law in different jurisdictions, Home insurance is not. However, if your home is insured, your insurer will require coverage from time to time to protect their interest in your house. For instance, if your home is damaged, instead of walking away from the mortgage, you will have the access to funds to rectify the damage.

In a case whereby you do not have a mortgage, where yiu paid for the house in full, when damages occur, it becomes your full responsibility to repair. This is why it is good to buy a home insurance.

There are different coverages that home insurance cater to. These coverages include:

  • Liability Coverage

Liability Coverage is a type of home insurance policy that covers the payment for property damage and injuries you caused to a third party.  It extends to the Coverage of attorney fees in case whereby you are sued, Understanding this more by example will be a case where a visitor had an accident on your property, the Liability Coverage foots the medical bills and lawsuit fees in a case whereby you are being sued. Technically, your net worth should equate the amount of your Liability c9verage. That is, something that can be taken away from you in case you lost the lawsuit.

  • Extra Structures on your property

Liability Coverage insurance covers other parts of the house eg a shed or even the fence. In a case whereby the fence falls, Liability Coverage covers the bills.

  • Dwelling Coverage

This type of insurance coverage protects the whole building from unforeseen circumstances like fire outbreak damaging the building or other parts attached to the building like the garage. Usually, the dwelling Coverage amount equates the amount of cost in rebuilding the house.

  • Personal Property Coverage

This Coverage helps to pay for property theft or damage like loss of furniture, appliances, etc. The Coverage is usually set between 50% to 70% of the dwelling Coverage.

  • Additional Living Expenses

In a case whereby you have been temporarily displaced from your home because of damage covered in your insurance policy, the additional Living expenses Coverage caters for feeding and other activities needed to survive.

Note that in a case of damage cause by natural disasters like floods and earthquakes, the standard Home insurance policies do not cover such. Those are some special type of insurance policies.

  1. Life Insurance

Simply put, life insurance is the easiest way to replace ones income peradventure death comes. This falls under our top 4 insurance policies because it is vital and everyone should buy one. We all have dependants who will suffer if anything happens to us. To prevent this, it is wise that we opt for the life insurance policy.

The life insurance policy is said to be in two categories;

  • Term Life Insurance

The term insurance as the name implies simply helps you lock rates per term. Say, between 10 to 30 years. The Premiums you pay during this term are in levels. You can always renew it once your term elapses. But this will come at a higher cost and it will be done yearly.

  • Permanent Life Insurance

As the name implies, the permanent life insurance policy provides coverage for a lifetime. It comes with a death advantage whereby Premiums paid during one’s lifetime is saved up for ones dependants after his demise. Apart from the death advantage, one could collect a loan as against this type of life insurance provided the money his built up. Also, one can stop this policy and the total value of cash paid will be returned minus surrender charges.



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