What are the different types of Insurance coverages in the United States of America?

There is no certainty or guarantee in his beautiful journey called life. Life can let you experience beautiful moments and exhilarating experiences and also turn everything upside down in an unpredicted catastrophe like an accident, a kitchen fire, or something entirely unexpected causing a severe loss. An insurance policy protects you and your family from any unexpected financial loss, an unforeseen medical emergency, or the unexpected event of death. An insurance policy helps you be prepared for any eventualities that may spring up unplanned.
The basic definition of Insurance is that it is a policy through which an individual or entity gets financial protection, and if there are damages, reimbursement for the damages is offered against a small amount of money that is paid as a premium either in monthly, quarterly, half-yearly or annual periods.
Let us explore the different types of Insurance coverage provided in the USA and the benefits of each policy.
The types of Insurance in the USA are Auto Insurance, Health Insurance, Homeowner Insurance, Renters Insurance, Life Insurance, Disability Insurance, Long-term care Insurance and Umbrella Insurance. Depending on your circumstances and requirements, can choose the plan that best suits you.
Let us go through each of these insurance policies one after the other:
1. Auto Insurance/Car Insurance: It is a known fact that driving without Insurance is illegal in almost every state of the United States of America. If you are caught in an accident where you may or may not be at fault and do not have car insurance, you will likely end up paying a very high penalty. There are various Insurance policies under the Auto Insurance category that cater to different kinds of damages and injuries.
(i) Liability Coverage: This type of coverage pays the injured person for treatment of injuries and property damage caused through you if you are involved in an accident and are at fault. Based on the policy limit, this policy also covers fees for legal defence, settlements or judgements if a case is filed against you. On average, body injury claims are valued at approximately $20000 per claim, and a wise decision would be to buy liability coverage that would be sufficient to cover the expenses you are likely to incur in a lawsuit filed against you. In all states except New Hampshire and Virginia it is mandatory to have a minimum amount of liability insurance so that you can drive legally. You may face a court judgment and garnishing wages to cover the deficit if there is not enough liability coverage.
(ii) Comprehensive and Collision coverage: This type of Insurance offers coverage for damage caused to your vehicle because of fire, hail, floods, falling objects (for example, a tree branch) and animal collisions, for example, being hit by a deer). Irrespective of whether you were at fault or not, if damage is caused to your vehicle, a collision coverage policy would cover it. Comprehensive and collision coverages are often sold together and are optional. However, if you have availed of a loan to purchase the car or have a lease on the car, then the institution financing your purchase may require you to have comprehensive collision coverage.
(iii) Uninsured/Underinsured motorist coverage(UM): In the event of being hit by a car whose driver is uninsured/underinsured, this kind of coverage pays for the medical expenses for both yourself and your passengers. The policy also pays for lost wages and compensates for the pain and suffering caused due to the accident. Some states also allow for such coverage to pay for the damage to your car. The uninsured/underinsured motorist coverage is mandatory in some states of the United States of America.
(iv)Personal Injury Protection Coverage (PIP): No matter who was at fault in the accident, PIP coverage allows your insurance provider to pay for injuries caused to you and your passengers. You can also be reimbursed for lost wages, rehabilitation costs, and child care, as you may not be able to handle child care owing to your injury. PIP is mandatory in most states, optional in some states and unavailable in some states.
(v) Medical payment coverage(Medpay): Medpay has very low coverage amounts, usually between $1000 and $5000. It covers the medical expenses of your passengers as well, regardless of who was at fault. Car insurance companies often suggest necessary and optional insurance coverages so that you can make an informed choice.
2. Home Owners Insurance: No law makes it mandatory for you to have a Home Owners insurance. However, if you have a mortgage on the house, the lender will likely require you to have an insurance policy so that their interest in your property is safeguarded, and in case there is damage caused to your property, there will be enough funds available to rebuild the property and replace your belongings. If you own your property mortgage–free, buying a homeowner’s Insurance is still a financially prudent thing to do. Home insurance policies offer several types of coverage, which include
(i) Dwelling Coverage:- Usually, this kind of coverage is the amount that is needed to rebuild your house in case the structure of the house is damaged due to any reason like fire, wind, theft, vandalism, etc.
(ii) Personal property coverage:- Usually set at 50- 70% of the dwelling coverage, Personal property coverage protects personal belongings like furniture, clothing and appliances. It protects from causes such as theft, fire and unexpected explosions.
(iii) Other structures coverage: Attached structures like a tool shed, fence or garage are covered under this type of coverage.
(iv) Liability Coverage: It pays for injuries or damage to property caused by you to others. It also covers the legal expenses if you were sued. The amount for such coverage is usually your net worth, which you can be sued for.
(v) Additional living expenses: If you have to rebuild your house, you may be temporarily required to relocate to a different place. Such coverage provides for the additional living expenses you will likely incur on food and rent. A regular home insurance policy does not usually cover damage caused by floods or earthquakes. There are separate policies that provide for this kind of damage.
3. Renters Insurance: Even if you do not own a house, you can purchase a renter’s insurance policy to ensure that your personal belongings are covered in case of a loss. Most homeowners have a Home Insurance Policy that surrounds the house’s structure and the owner’s belongings but does not include tenants. Some homeowners also ask for a copy of your renter’s insurance policy when they rent the house to you. Renter’s Insurance includes Personal property coverage, liability coverage, additional living expenses, and Medpay coverage. It is a very affordable policy coverage.
4. Life Insurance: Suppose you are the primary wage earner of your family. In that case, a good life insurance policy is always recommended as it protects your family from financial hardships in the event of your sudden, unfortunate death. We know of two types of life insurance to choose from- Term Life Insurance and Permanent Life Insurance.
(i) Term Life Insurance: This coverage allows you to lock in your rate for a period, usually 10 to 30 years. After the set period, your coverage expires unless you choose to renew it. This is more affordable and chosen for purposes like temporary financial requirements, income replacement, paying off mortgages and student loans, and funding your children’s education.
(ii) Permanent Life Insurance: This kind of coverage offers lifetime coverage. There are different types of Insurance, such as universal life insurance, whole life insurance, variable life insurance, and final expenses insurance. Did you know that cash-value life insurance covers burial and last-rite expenses?
5. Health Insurance: A health insurance policy is necessary and helps people pay for their health care expenses, doctor visits, medicines, hospital stays, therapies and surgeries. Most Americans are insured for their health through their employer. There are private health insurance plans at the Federal Health Insurance Marketplace. If you qualify for a premium tax credit or subsidy, you can buy a high-deductible health plan, which will reduce your premium and benefit from a tax-free health savings account. Health insurance is available during specific open enrollment days. This is usually done for private plans through the marketplace from January 1 to January 15 unless you get married or have a baby.
6. Disability Insurance: Disability Insurance is the most neglected Insurance coverage despite being the most important one. The reasons that cause disability are arthritis, chronic joint pains, disorders of the muscles, joints, back, cancer, injuries, poisoning, heart disease, and mental disorders. The importance of disability insurance can be understood by the fact that if you do not have disability insurance coverage, you will exhaust your savings, dip into your retirement accounts for day-to-day expenses, and go bankrupt.
7. Long-Term Care Insurance: If you reach age 65, you will likely need long-term care. Long-term insurance plans can help you pay for in-home care expenses, adult day care and nursing home stays. A good choice would be to buy a policy combining life and Long-Term care insurance.
8. Umbrella Insurance: This type of Insurance provides additional liability insurance. For example, if someone tripped and fell in your house and sued you for $50000 if your home insurance liability covers only $30000, the remaining $20000 that you would have to otherwise pay from your pocket would be covered by the Umbrella Insurance.
CONCLUSION:
Since there is no sure-shot way of predicting what life might throw at us, the best we can do is to be prepared by choosing the right kind of insurance policy to safeguard us from any losses.
FAQ’s:
Q. What is the important insurance coverage that one should not skip?
This depends on your requirements and the financial position you are currently in.
Q. Who can be reached out to help me choose a good insurance plan?
You can contact a reputable insurance agent who will advise you on the best insurance coverage based on your needs.

John Smith

John Smith

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