The Comprehensive Guide to Insurance Coverage

If your eyes glaze over when someone starts talking about #insurance, you’re not alone, but you need to know the facts when it comes to the different kinds of insurance and what they cover (and how they cover it). From health to auto and homeowners to life, there’s a ton you need to know!

Insurance premiums can take a big bite out of a monthly budget, but not having enough coverage can be even more costly.  Let’s look at the four primary insurance types.

1. Health insurance

Health insurance is coverage that typically pays for medical, surgical and prescription drug expenses in exchange for a monthly premium.

Types of health insurance plans

• Public health insurance is provided at low or no cost through the federal and/or state government. It includes Medicaid, the Children’s Health Insurance Program (CHIP) and Medicare.
• Private health insurance may be provided through an employer or purchased privately.

These are the most common private health insurance plans:

• HMO: Health Maintenance Organization – The most restrictive plans that only work with a network of healthcare providers. To see an out-of-network specialist, the insured needs a referral from their primary care physician (PCP).
• PPO: Preferred Provider Organization – Allows the policyholder to choose an in-network doctor at a lower cost, or an out-of-network doctor at a higher cost. No referral necessary to see a specialist.
• EPO: Exclusive Provider Organization – EPOs do not cover out-of-network physicians, but don’t require referrals for specialists.
• POS: Point of Service – POS plans require a PCP on an HMO-style network, while also allowing out-of-network options at a higher cost. A referral is required for specialists.

2. Life insurance

Life insurance is a contract between an insurance company and a policyholder that guarantees a sum of money to the policyholder’s beneficiaries when the policyholder dies in exchange for monthly premiums paid during the insured’s lifetime.

Types of life insurance

These are the five most common kinds of life insurance plans:

• Term insurance – Life insurance with a predetermined term; plans are renewable at the term’s end.
• Whole life insurance – Premiums can be locked in for the term, and a percentage of premiums goes toward the policy’s cash value.
• Universal life insurance – Premiums can go up or down, or even be deferred within certain limits. Cash values can be accessed and withdrawn.
• Variable life insurance – The policy’s cash value will be invested in the insured’s choice of stock, bond or money market portfolio.
• Universal variable life insurance – Flexible premiums and the ability to modify face values, along with investment options.

3. Auto insurance

Auto insurance protects the policyholder from financial loss in the event of an auto accident or theft.

Types of auto insurance policies

• Liability coverage – Includes coverage for bodily injuries, property damages or auto damages to another motorist if the policyholder is at fault.
• Comprehensive coverage – Pays for damages and losses to the car that were not caused by another driver.
• Personal injury protection – Covers medical bills for the policyholder and their passengers in the event of an accident.
• Collision insurance – Covers damages to the policyholder’s car if it’s involved in an accident.
• Uninsured/underinsured motorist protection – Pays for damages caused by another motorist who does not have sufficient coverage.
• Gap insurance – Pays the difference between what the policyholder owes on a financed or leased vehicle and what it is valued at if there’s a total loss of the vehicle.

4. Homeowners insurance

Homeowners insurance is designed to protect homeowners from liability and financial loss in case of damage to their home and belongings.

Types of homeowners insurance policies

• HO-2 – A policy that only protects against 16 specified perils.
• HO-3 – A broad policy protecting against all perils other than those excluded in the policy.
• HO-5 – A premium policy that usually protects newer homes and covers all perils, except the few excluded in the policy.
• HO-6 – Insurance for co-ops/condominiums, which includes personal property coverage and liability coverage.