The 5 Smartest Insurance Policies You’ll Ever Own

Accidents happen – as do ailments and death. While risk coverage might not be the fluffiest of conversations, it’s an essential one to have, especially with loved ones and property to protect.

Depending on your biggest areas of risk, insurance needs will vary. But there are five policies every living, breathing, driving and house-dwelling human should own.

#1: Life Insurance

This provides funds for your loved ones when you die. Proceeds are usually paid out in a lump sum, or could also be paid in installments. Coverage can be obtained through work or by purchasing an individual policy. The two basic types are: Term life, which provides life insurance coverage for a specified period of time; and Permanent (cash value) life, which provides protection for your entire life. The latter can be broken down further into:

Whole life: you make level (equal) premium payments for the rest of your life; death benefits are predetermined and guaranteed
Universal life: premiums are paid in any amount, as long as policy expenses and the cost of insurance coverage are met
Variable life: you also pay a level premium for life, however, the death benefit fluctuates depending on the performance of investments in your subaccount (the pool of managed investor funds used to secure a policy objective)
Variable universal life: a combination of universal and variable life

# 2: Health Insurance

This safeguards your assets from the high costs of health care. It covers major health crises and routine costs including physical exams, prescription drugs, hospital stays, pregnancy, and more. The cost and range of protection depends on your insurance company and the policy you select.

#3: Auto Insurance

Should you get into an accident, auto insurance covers damage to your car and liability claims against you. It also covers loss through theft, vandalism, and natural disasters. Your policy is basically a contract between you and your insurer specifying each party's rights and obligations.

#4: Homeowners Insurance

This protects your home and possessions inside of it, and provides compensation for liability claims, medical expenses, and other expenditures resulting from property damage. If you have a mortgage on your home, chances are your lender already requires it. Even if you own your home outright, you’ll still need coverage to protect your interests and assets.

#5: Disability Insurance

Sometimes called “paycheck insurance,” in the event of serious injury or disability this policy will pay you a benefit that replaces part of your earned income (usually up to 70 percent). You can obtain short-term and long-term coverage, or both.

Know Before You Blow $ On a Less Than Comprehensive Policy

Accidents happen, as do misunderstandings with insurance providers. The latter is at least a risk you can avoid. Before you commit to a policy, always determine:

The insurance company's rating
The level of coverage you want and need
The true long-term cost of a plan
Potential gaps in your coverage and how you’re going to fill them 

The next step? Buying insurance.