Does your financial plan include insurance?  If not, it should.  What type of insurance you ask?  It depends on your individual needs and goals.  Before we get to specific types of insurance, let’s talk about why insurance should be a part of your financial plan.  It’s simple; insurance is financial protection against an unexpected or in some cases even an expected event.  It gives peace of mind knowing that should something occur, you and/or your loved ones would be covered.  Not having insurance can be costly and in some cases can lead to financial disaster. 

As I mentioned earlier, types of insurance to have are an individual decision.  There is insurance for just about everything, you name it there is probably insurance for it.  Now I am not suggesting that you go and purchase every type of insurance policy there is but I am going to recommend 4 types.  Before we get to those, I thought I would share a few of the not so common types of insurance:

• Body Part Insurance
• Kidnapping and Ransom Insurance
• “Change of Heart Insurance” (if your significant other changes their mind about the pending nuptials)
• Alien abduction Insurance

And yes, there is such a thing as alien abduction insurance.  While I’m not sure how probable that is, at least there is a policy available right?  Ok enough time spent there, on to my recommendations. 

The 4 basic types of insurance that everyone should have as part of their financial plan include:

• Life Insurance
• Auto Insurance
• Homeowners/Condo/Renters Insurance
• Healthcare Insurance

Life Insurance is financial protection to cover expenses associated with the passing of you or a family member.  It generally covers funeral expenses and in some cases pays out an additional lump sum that can act as a partial replacement of income or can be used to pay off some remaining debt. It’s all dependent on how the policy is set up.  While we don’t like to think about our loved ones passing, it is important for everyone in the family to have some type of life insurance policy, especially if they are the main source of income.  There are many different types of life insurance policies including, whole life, term life, universal and variable.  Which policy to select is dependent on many variables and is unique to individual circumstances. 

Auto Insurance is financial protection that covers expenses associated with an accident or damage to your vehicle.  It may not cover ALL of your expenses but it will in most cases cover most.  Generally in most areas it is required that auto owners have some type of insurance. 

There was a time that my car insurance lapsed(expired) and it ended up costing me a lot of money when I had a minor accident. (I can’t imagine what it would’ve cost me had it been a major accident.)  I had to pay for damage to the other car and my insurance rate increased due to me not having “current” insurance.

Homeowners/Condo/Renters Insurance is financial protection that covers expenses associated with damage to your property.  It also covers expenses for assets within the property as well expenses for accidents that may occur on the property.  It is important to understand exactly what is covered when it comes to Condo and Renters insurance because those policies are a little different than Homeowners policies.

I was actually sued once by someone who fell outside of my Condo on ice.  Generally speaking the Association is responsible for anything OUTSIDE of the Condo. In my case it worked out and I didn’t owe due to the Associations responsibility but be sure you are clear on what is covered and what isn’t.

There is also an added benefit to homeowners/condo/renters insurances.  Some of the policies even cover assets while you are traveling.  When some of my items were stolen at a hotel in Las Vegas, I was able to contact my insurance to have the items replaced.

Healthcare Insurance is financial protection for medical expenses due to any type of illness or injury.  There are many types of healthcare insurance plans and it is dependent on a variety of factors.  It is best to thoroughly investigate the options available before making a decision.  A good place to start is by taking a look at your employer benefit options first.

One thing to note is that there is a cost associated with any of these 4 types of insurances in the form of a premium and/or deductible.  Premium is the amount you pay for the policy and the deductible is the amount paid when you file a claim.  The cost of the premiums and deductibles vary and are dependent on specific policy characteristics.

What have your experiences been with or without insurance?  Let me know in the comments below.