Insurance 101: Are You Covered for Home, Auto, Life, and Health? (2024)

Want the insurance 101 on the top 4 types of insurance? What are the basics of insurance policies and coverage?

If you’ve been covered under your family’s insurance, and seeking your own insurance policy for the first time, odds are you need to start with insurance basics. Don’t let terms like liability coverage, rights reserved, or property-casualty insurance scare you from making this important life decision.

Some of you have just spent the last few years worrying about classes, tests, grades, and a degree, and definitely not about something like insurance. Maybe you are already out of college and have a fair amount of knowledge about insurance but would like to learn more.

In this insurance 101 guide, we’ll review the Big Four — renters, auto, health, and life insurance — we will show you what you may need, how to get it, and how to do it as affordably as possible. These basic insurance concepts will be helpful to go over and be reminded of because insurance is an essential part of life.

Onward to learn how insurance works, so you can choose the right insurance agency or insurance company to provide the right coverage.

#1. Renters Insurance: What You Need to Know

Renters insurance protects you when you rent a property. It is similar to homeowners insurance, but it protects your valuables in the dwelling, not the property itself.It’s one thing to consider if you’re debating buying a home vs renting an apartment. Either way, you need insurance!

Documenting Your Belongings

You may need to take photos or videos of your belongings so that you can gauge how much renters insurance to get. People tend to underinsure because they don’t think their property is that valuable, but it’s always good to assess the value of your stuff with a realistic estimate.

Insurance providers don’t require you to take inventory of your belongings, but just to be safe, make sure you have supporting documents if you need to file a claim. Keep those documents in a safe place where they won’t get lost or destroyed.

How to Get Renters Insurance

The first step in getting renters insurance is choosing a provider that fits your needs. Once that’s done, you can call the provider and begin the application process. Some providers allow you to fill out applications online, but that’s not always the case.

(Side note: Don’t be afraid to fill out applications for multiple providers. You can determine which has the most affordable policies that way.)

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How to Keep Renters Insurance Affordable

Renters insurance is relatively inexpensive compared to homeowners. Generally speaking, there are two types. One is actual cash value, and the other is replacement cost.

The best insurance policy to get is replacement cost because actual cash value only compensates for the amount of the property when it was damaged. Replacement cost covers how much you spent on the item.

For example, if you had a kitchen table you paid $500 for and it was destroyed, the actual cash value would compensate you for the depreciated value of the table. In contrast, the replacement cost would give you back the whole $500.

Replacement cost is slightly more expensive than actual cash value, but it’s definitely worth the extra price if you’re able to get the total replacement value of your damaged property.

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#2. Auto Insurance: One of the Major Types of Insurance

Auto insurance covers your vehicles if they are damaged. It is one of the major insurance types and is a billion-dollar industry. The top five companies in the U.S. are USAA, State Farm, GEICO, Nationwide, and Farmers.

The Different Types of Auto Insurance

There are five types of policies that you can get for your vehicle. Below, we will look at each one in detail.

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A. Liability Insurance

This type covers damages from an accident where you’re at fault. Damages can be from the other person’s car or caused by bodily injury.

B. Collision Coverage

Collision coverage is needed when you get into an accident with another vehicle or property like a fence or light post. The accident doesn’t necessarily have to be your fault.

C. Comprehensive Coverage

Comprehensive coverage protects your vehicle from damages caused by objects other than someone’s car. For example, if a tree limb falls on your car and causes damage, comprehensive will cover those damages.

D. Personal Injury Protection

Personal injury protection (PIP) covers medical expenses should you get injured as a result of an accident. This type is also referred to as “no-fault insurance.”

E. Uninsured and Underinsured Motorist Coverage

This type of coverage protects you by covering expenses that the at-fault driver’s liability insurance can’t cover. If the at-fault driver has a liability limit that is too low, then this will kick in and pay for any additional expenses.

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What You Will Need for Auto Insurance

To get car insurance, you will need to give the provider of your choice your personal information, like your date of birth, address, and full name. They will also need to see your driving record. Depending on your driving history, your rates may be higher or lower.

Your provider will need your vehicle’s information, and you may need to show that you are eligible for the discounts they offer.

How to Get Car Insurance

To get auto insurance, you will need to start getting quotes from different providers. You can get quotes online or through an agent. Again, it’s good to get multiple quotes to see which provider is the most affordable.

The next part of getting car insurance is to pick your deductible. Your deductible is how much you have to pay before the provider pays for a claim.

How to Keep Auto Insurance Affordable

There are many ways to get affordable car insurance. Several methods include improving your credit score, keeping a clean driving record, and applying for discounts.

You can improve your credit score by staying on top of your bills, paying any outstanding debts, and increasing your credit limit. These can be challenging, especially in this pandemic, but it’s always good to make sure that you pay your bills on time and repay any debts as soon as possible.

(Side note: To stay on top of your bills, try creating a budget or cutting your budget so that it’s more manageable.)

Plus, there are ways to find savings on car insurance for women.

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Obeying the rules of the road and being a defensive driver are surefire ways to keep a clean driving record. Avoid reckless driving behaviors and road rage. Providers are less likely to insure drivers they consider high-risk. Some even cancel their policies with reckless drivers.

Discounts for auto insurance include low mileage, good driver, accident-free, good student, loyal customer, and multi-car. These discounts can save you between 5% and 27% on your monthly premium. You can also get discounts for bundling home and auto or other insurance types with a single provider.

Also, keep in mind that your auto insurance rates can vary based on your Zip Code. So, if you’re moving be sure to check rates before signing your lease.

#3. Health or Medical Insurance

Health insurance, also known as medical insurance, covers medical expenses for an individual or many individuals, depending on the situation. Anthem, Centene, UnitedHealth, Humana, and Health Care Service Corporation (HCSC) are the top five largest companies in this industry. It is also a billion-dollar market.

What You Will Need for Health or Medical Insurance

Like auto insurance, you will need to prove your date of birth, but you will also need to verify your citizenship or your immigration status. You might need to let your provider know your medical history, like your diagnoses and what medications you are taking.

(Side note: It’s important to keep important documents like your birth certificate and Social Security card safe so that your identity can’t be stolen. Consider storing them in a secure location like a safe deposit box.)

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See Also

Do I need special insurance to drive for Uber or Lyft?

How to Get Health Insurance

The steps to get health insurance are similar to the other types. Figure out which provider is the most affordable for you and covers your doctor or medical team, and then find out when you are allowed to enroll. Health insurance plans have an open enrollment period for the general public and a special enrollment period for those who have had major life changes.

How to Keep Health Insurance Affordable

The most affordable health plans are from Medicaid or Medicare. You can get Medicare when you’re 65 years old or older. Medicaid can be applied for through your state if your income falls below a certain threshold.

The best place to find affordable insurance besides Medicaid or Medicare is healthcare.gov. They can determine the best provider for you based on your income.

#4. Life Insurance

Life insurance covers your funeral costs, medical expenses, and burial costs should you pass away. The money is paid out to your beneficiaries to help them deal with the debts you leave behind. Northwestern Mutual, New York Life, and Lincoln Financial are some of the largest companies in the U.S. in this industry.

The Different Types of Life Insurance Policies

It’s important to know the different types of life insurance policies. Below, we will get you acquainted with each one.

A. Whole Life Insurance

This policy stays in effect for the duration of the insured’s lifetime or to a specific date. It also accumulates cash value as well. Premiums are at a fixed rate.

B. Term Life Insurance

Term stays in effect for a shorter period of time than whole and is also at a fixed rate. Term policies can be as short as five years or as long as 40 years, depending on what you need. This policy only pays out when the insured passes away.

C. Variable Life Insurance

Variable is a policy that allows you to allocate some funds for your beneficiaries to an investment fund.

D. Variable Universal Life Insurance

Variable universal life (VUL) allows you as the policyholder to invest and change the amount of coverage on your policy easily.

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What You Will Need for Life Insurance

For life insurance, you will need to have an in-person medical exam by a paramedical. Some policies don’t require a medical exam, but overall, it is the norm. You have to find an agent that can get a paramedical to do the exam for you.

You will need to tell the provider your height, weight, date of birth, lifestyle habits, and financial situation on the application.

How to Get Life Insurance

The first step in getting life insurance is determining which type you need. Once you’ve done that, you can find an agent and begin the process of applying.

How to Keep Life Insurance Affordable

The best way to get affordable life insurance is to make sure you take care of yourself. Your mental health, as well as your physical health, should be your top priority. Make sure that you are eating well and exercising. Quit smoking if you struggle with that addiction.

Do whatever it takes to ensure that you are in good health. Living a healthy life will significantly lower your premiums.

Insurance Is Important to Invest In

Whether you are in college or are an older adult, insurance is important to invest in and acquire. We’ve looked at four types, but there’s still so much more to learn about the subject. Do what you can to educate yourself and others about it. It will save you time, money, and a lot of headaches.

Get Your Simple Budget Spreadsheet

Investing in these insurance policies will save you financially later? With the Simple Budget Spreadsheet, you’ll be able to track your expenses and savings. It’s easy to use and compatible with Google Docs and Microsoft Excel.

Look through this insurance 101 guide again so that you can better understand insurance and how it works. Do your own research and put terms into your own words so that you can retain the information better. Don’t hesitate to ask for clarification and insight from those with more insurance experience than you.

It’s a wise choice to get into the habit of protecting yourself, your assets, and your financial future, even as a recent graduate. Familiarizing yourself with these policies will make future decisions like home insurance or small business insurance even easier.

What are the basics of insurance? Wondering if you are covered for home, auto, life, and health? This is insurance 101 by @usinsuranceagts. #Covered #Insurance #LifeInsurance #FinancialPlanning #HomeInsurance #AutoInsurance Click to Tweet

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More About Guest Contributor

Peyton Leonard writes and researches for the insurance comparison site, USInsuranceAgents.com. Peyton is passionate about educating others about the importance of having and understanding insurance.

Last Updated on July 31, 2023