5 Types of Insurance the Average Family Needs

by Kailey Hagen | Published on Oct. 30, 2021

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A couple with a young daughter holds up a cardboard roof.

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Purchasing these policies could save families a fortune in an emergency.

Most people don't like spending money on insurance, but it's one of those things it's best not to get caught without. Everyone hopes they don't need it -- but if they do, it can save them from paying thousands of dollars out of pocket.

There are policies for just about everything these days, from pets to weddings. But there are only a few types of insurance that everyone ought to consider. Here are five the typical family doesn't want to get caught without.

1. Health insurance

Medical bills can become expensive in a hurry. Even a single ER visit could cost $1,000 or more. Health insurance isn't perfect -- it has its copays, premiums, and often high deductibles -- but it can still help families shoulder the costs of their medical treatment.

People who aren't eligible for insurance through their jobs can purchase health insurance through an online marketplace. Typically, people must wait until the annual open enrollment period to purchase or change a health insurance plan. The open enrollment period for 2022 is Nov. 1, 2021 to Jan. 15, 2022. But those who miss this window may still be able to get coverage if they qualify for a special enrollment period due to the birth or death of a family member, a job change, or loss of existing insurance.

2. Auto insurance

Auto insurance is a legal requirement for drivers in nearly all states. The exact amount required varies by state, but $25,000 of bodily injury liability coverage per person and $50,000 per accident is a common requirement. Many states require drivers to carry at least $25,000 of property damage liability coverage as well.

Drivers must have at least state-minimum auto insurance if they plan to get behind the wheel, even if they don't own a vehicle. Drivers that do own a car may want to invest in additional protections like collision and comprehensive coverage to protect their cars.

It's often a good idea to purchase more than state-minimum coverage. This raises monthly premiums, but reduces the risk of huge out-of-pocket costs if a driver causes an accident insurance can't cover fully.

3. Homeowners or renters insurance

Homeowners insurance is typically a requirement for homeowners who have mortgages on their homes. It's a smart investment even if it's not required, because homes are expensive. It'd be difficult for most people to pay for a new home out of pocket if their existing one was destroyed in a fire or natural disaster.

Those who rent should consider renters insurance instead. These policies are typically more affordable than homeowners policies, because they don't include coverage for the property itself. That's the landlord's responsibility. But they do provide liability coverage and protection for a renter's personal property.

4. Life insurance

Life insurance protects a family's finances following the death of the policyholder. There are several types of life insurance available, but term life insurance is the most common, and the most affordable.

These policies have a term length -- often between 10 and 30 years. The policyholder pays monthly premiums, which vary depending on age and health status, and if that person dies during the policy term, the insurer pays out the benefit amount to the listed beneficiaries.

There's also whole life insurance and universal life insurance that offer lifelong protection for the policyholder, but these policies are more expensive, and they're not suitable for everyone.

5. Long-term disability insurance

If a worker becomes disabled, they won't be able to count on a paycheck, and they may not be able to cash in on a life insurance policy. That's why long-term disability insurance is a good investment.

This helps the policyholder replace some lost income if they're disabled for an extended time. There's usually a minimum number of days the person must be unable to work before this policy kicks in.

Some employers offer long-term disability insurance as an employee benefit, but it's also possible to purchase these policies individually.

This isn't an exhaustive list of the insurance options available, and some families may want additional policies to feel fully protected. But for those who aren't sure how to best protect their family's finances, the five policies listed above are a good place to begin. Shop around and compare quotes to see which companies offer the most affordable rates, and consider bundling policies when possible to save on costs.

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