Nobody likes surprise bills. But at some point or another, you’re going to receive them. Whether you are in a car accident and need to repair your vehicle, or you break a leg and need medical treatment, those bills are going to be steep.
Luckily, there is insurance available to help prevent surprise expenses from derailing your financial situation. Most Americans have a handful of insurance policies that all cover different aspects of their lives.
And while it’s a bummer to pay so many different policies each month, they ultimately protect you from big bills, debt, and even bankruptcy later on.
Wondering what the most common types of insurance policies there are? Read on below to see what they are and how they work.
1. Title Insurance
A title insurance policy is necessary each time you buy a house. This protects homeowners from problems caused by previous homeowners.
Each time a house is purchased, records of who holds the title are stored in public databases. And each time another party establishes an interest in that policy, such as with liens or loans, additional records are filed.
So when you come along to buy a home, your title company will search for all of these records to see if the title is in good standing. But there’s a chance they could have missed something.
A year later, a bank could come knocking, trying to take the house, since the last homeowner didn’t make all their payments. Now, you’re in the middle of a sticky situation that you didn’t cause.
Instead of this, you purchase title insurance. This protects you from any issues that could arise due to records that the title company couldn’t find at the time of purchase.
2. Home and Renters Insurance
Whether you buy a home or rent an apartment, you need an insurance policy. Both are just as important.
Homeowners need a policy that protects their entire home, and the contents of the home. It will also cover liabilities associated with medical expenses, in case someone is hurt due to the property.
If your house burns down or is destroyed by a tornado, your home insurance policy will cover the cost to rebuild it. Or you can choose to receive a check for the value of your home, and you can go buy a new house elsewhere.
If your belongings are damaged or destroyed, your policy will cover the cost to replace them either at retail value or current value. And if you live in a flood zone, such as coastal Florida, you’ll want an additional flood insurance policy, which covers your home when water levels fill your home and cause damage to the bottom floor.
Renters insurance essentially does the same thing. But if you accidentally burn down a property you live in, your policy will pay off the property owner, ensuring they get their money and don’t sue you.
3. Life Insurance
There are different types of life insurance policy options you can choose from, such as whole life insurance. But many people overlook life insurance, simply because they don’t understand it.
In general, life insurance will provide money to your family if you were to die unexpectedly, and could no longer provide for your family. A basic policy would cover funeral expenses, while the best life insurance policy will pay your family a sizable amount.
4. Auto Insurance
You can’t legally drive a car on public roads if you don’t have auto insurance. And auto insurance varies from state to state.
In no-fault states, your policy will cover you and your vehicle, even if someone else causes the accident. In at-fault states, whoever caused the accident is on the hook for damages, so their insurance policy would cover expenses.
If their policy doesn’t have enough coverage then your policy would kick in afterward to cover the remaining repair and medical expenses.
If you’re looking for the lowest car insurance rates, then you’ll choose a policy that just offers liability insurance, which covers damage you cause to other people, but not damage you cause to your own car, or damage is done to you by others.
5. Travel Insurance Policies
When you travel domestically, such as in another state, there’s a good chance your current health insurance policy covers you. If you incur an accident or illness out of state, you’ll just want to visit an in-network healthcare provider in your local area.
No additional policies are needed. But when you travel internationally, your US-based health insurance policy isn’t going to cover you. That’s why you’ll need a temporary travel insurance policy.
These policies are designed to start the day you embark on your trips until the day you arrive back on US soil. Depending on the specific travel insurance policy you choose, they can cover a wide range of things.
All of them will cover emergency healthcare abroad. So if you need medical attention in any other country, you can visit the nearest healthcare provider for treatment.
You’ll pay your medical bills upfront, or once you return home. After you pay, you’ll file a travel insurance claim, and they’ll reimburse you for the expenses you incurred. If you plan on engaging in dangerous sports, like scuba diving or skydiving while abroad, you might not be covered and a specific policy may be required.
Travel insurance may also cover travel needs such as missing luggage, delayed or canceled flights, and trip cancellation so that you don’t lose money if you can’t even go on your trip.
6. Health Insurance
And of course, since we live in the US, with the most complicated healthcare system in the world, we need health insurance. Health care in America is extremely expensive, so even basic checkups and procedures require insurance.
But health insurance isn’t very affordable unless you can qualify through your employer. While it’s a complicated matter, it’s still essential to have a policy in place, and hopefully, we will see healthcare reform in the near future.
Insurance for Everything
There are many other insurance policies you can get, depending on your unique situation. In general, most will work the same when you file a claim. You just need your insurance policy number, and ideally photos of the incident you are reporting, to make the process as painless as possible.
And while you need to have many different policies, you don’t always have to pay a lot. You should get new insurance quotes every year to see if you qualify for lower rates.
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