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8 Types of Insurance — and 8 Reasons You Need Them

Samantha Rose
Samantha Rose is a personal finance writer covering financial literacy for OppU. Her work focuses on providing hands-on resources for high school and college-age students in addition to their parents and educators.
Read time: 10 min
Updated on January 31, 2023
Unexpected cost? There’s an insurance for that. 

Life will throw you a curve ball — there’s no question about that. Whether you’ll have insurance when it does is another matter entirely. 

Insurance buffers you from unexpected costs like medical expenses. And while most people know that insurance is important, not everyone knows the different types of insurance out there and how they can help. 

Some common types of insurance include:

  • Health insurance
  • Car insurance
  • Life insurance
  • Home insurance

But there are others, too. Here are eight types of insurance, and eight reasons you might need them.

1. Health insurance

Why you need it: Both expected and unexpected health care expenses — including routine visits, medications, emergency stays, and serious surgeries — can add up quickly and cause a lot of debt for those who can’t afford the out-of-pocket costs.

Who needs it: Everyone

What it is: Health insurance is a contract between a health insurer and a policy holder that requires the health insurer to pay for all or at least a portion of medical costs. 

2. Car insurance

Why you need it: Driving while uninsured is against the law and dangerous because the driver and their vehicle aren’t protected against an accident, collision, or general theft and vandalism.

Who needs it: Drivers

What it is: Auto insurance covers cars, motorcycles, trucks, and other vehicles, and is intended to protect against physical damage or bodily injury that could result from driving, whether the incident is reckless or an accident.

3. Life insurance

Why you need it: Death can be expensive  ⁠— from settling an estate to planning a funeral, the associated costs can really set you back ⁠— but a life insurance policy will ease the financial burden placed on a surviving spouse and dependents (i.e. children).

Who needs it: Those with dependents

What it is: In the event of death, a life insurance policy pays a beneficiary an agreed-upon amount of money to cover the expenses left by the deceased. A beneficiary is the person or entity named in a policy who receives benefits, such as a spouse.

4. Homeowners insurance

Why you need it: Maintain your home and keep its property value high, plus be covered in the case of major damage, like a house fire.

Who needs it: Homeowners and landlords

What it is: Homeowners insurance covers the house you reside in and any associated structures, such as a porch, garage, and balcony.

5. Umbrella insurance

Why you need it: If you think you may need extra coverage in addition to another type of insurance policy, for example on a home or vehicle, then umbrella insurance will help further protect you from risk of being sued for damages.

Who needs it: Anyone already insured

What it is: Liability insurance is what’s called umbrella insurance, because it covers costs in excess of other insurance policies.

6. Renters insurance

Why you need it: Things happen — that’s a mantra every renter knows to be true, and so they protect themselves and their property while renting. In fact, many landlords require it.

Who needs it: Tenants

What it is: Renters insurance is used by tenants to cover personal property in case of damage or theft, which is not the responsibility of the landlord. 

7. Travel insurance

Why you need it: Planning to jet off to a new destination? Then make sure the cost of your airfare is covered in case of medical emergencies or other incidents that may cause a trip to be cut short. 

Who needs it: Travelers

What it is: Travel insurance covers trip cancellations, lost or misplaced luggage, travel accidents, and even medical expenses while on the trip.

8. Pet insurance

Why you need it: Paying into pet insurance may be more cost-effective than paying a lump sum to your vet should your pet need emergency medical treatment, like an emergency room visit.

Who needs it: Pet owners

What it is: Pet insurance (mostly for dogs and cats) covers all or part of veterinary treatment when a pet is hurt or sick. There are two types of pet insurance: a wellness plan that covers routine visits and shots, and a health insurance plan that is more comprehensive of genetic diseases and major surgeries.

Expert perspectives

Here is expert insight regarding types of insurance that are often overlooked — but important.

Health insurance 

Michael Stahl, Executive VP and CMO of HealthMarkets

[H]aving adequate health insurance is a must. HealthMarkets recently conducted a survey where we asked more than 1,700 people of various ages, locations, and backgrounds throughout the United States about their health insurance plans and the coverage(s) provided. We found the following results:

  • Uninsured respondents frequently had higher costs for emergency medical care but are the least likely to be able to afford it.
  • More than 80% of uninsured respondents who had an emergency either could not afford the costs or required six or more months to pay off the bills.
  • While Medicare and Medicaid recipients were the least likely to have to pay for emergency costs, when they did, they were the least able to afford it out of the insured population.
  • Those on Medicare or Medicaid were two times more likely not to be able to afford emergency costs compared to those with employer-provided plans.
  • More Medicare or Medicaid recipients had lost monthly premiums and low monthly out-of-pocket costs than those on employer-provided or Affordable Care Act (ACA) plans.

Life insurance

Jason Fisher, founder and owner of

Life insurance is one type of insurance that is readily available, and yet, all its benefits are often overlooked. People tend to think of life insurance only as the means to pay final expenses. Although this is true, one of the more compelling reasons to purchase life insurance is to replace lost income for those that remain and are dependent upon that income to help keep the bills paid and/or to pay off debt.

An often overlooked expense that occurs when someone passes their property on to their heirs is estate taxes. Sufficient life insurance provides a way to pay these taxes. It’s wise to consider if the amount of your estate is large enough to warrant the need to cover estate taxes.

Life insurance is also a way for a parent or parents to ensure that their kids can still go to college if something should happen to one or both of them.

Then there are insurance policies that will accumulate cash value. The accumulated cash value can be borrowed against in lieu of taking out a loan when you’re short on cash.

For the business owner, a substantial life insurance policy can insure against business loss. Effectually, a key-man policy insures that if a business partner/partners or key employee/employees are lost in a fatality, the remaining partner/partners would have the financial resources to continue the business and find replacements for those individuals.

Umbrella insurance

Logan Allec, CPA and owner of Money Done Right

Think of an umbrella insurance policy as extra insurance for your insurance. … For example, let’s say you get into a car crash. Your auto insurance will pay out and make you whole. Now, let’s imagine in your car crash that the other car is a Lamborghini. Your insurance might not cover enough damage in that situation. Rather than paying out of pocket, your umbrella insurance policy will kick in and cover the difference. While not a likely scenario, an umbrella policy here could save you thousands of dollars.

In other words, your umbrella insurance policy will add extra protection to all of your existing insurance policies in case you are in a situation where your insurance just is not enough.

Uninsured motorist coverage

Prosper Shaked, owner of The Law Offices of Prosper Shaked

The number of uninsured and/or underinsured drivers in many states is staggering. This is especially true in states like Florida, which do not require that vehicles carry bodily injury coverage. Uninsured motorist coverage applies in situations where the at-fault vehicle owner and its driver either lack bodily injury coverage or fail to maintain bodily injury with enough coverage. 

As a personal injury attorney in Florida, I handle many unfortunate cases involving individuals who suffered injuries due to motor vehicle collisions. More than half of my clients are unable to pursue a claim against the at-fault driver and vehicle owner because these at-fault individuals did not carry bodily injury coverage. In these situations, the injured individuals are unable to successfully pursue a claim for their injuries and damages against the at-fault parties. These individuals are often left with mounting medical bills that they are forced to pay out of their own pocket. This can lead to financial ruin, all because of some other person’s negligence. However, if the injured individual carries uninsured motorist coverage, they will have an insurance policy that will cover their medical bills, lost wages, pain and suffering, and any other damages they sustained as a result of the motor vehicle collision. 

Uninsured motorist coverage also provides an additional layer of protection in the event that the at-fault parties do not have sufficient bodily injury coverage. This would be helpful in a situation where the at-fault parties carry minimal bodily injury coverage (i.e. $10,000.00) and the injured person’s injuries and damages far exceed [that amount]. The uninsured motorist policy would step in and provide the extra funds to pay for the damages that run in excess of the minimal bodily injury policy. 

It is extremely important for drivers to purchase uninsured motorist coverage to protect themselves and their passengers from the growing number of uninsured and/or underinsured drivers on the road today. 

I find myself having many difficult conversations with my clients explaining that I cannot pursue a claim on their behalf because the at-fault parties lack any bodily injury coverage. It is a tragic outcome, especially when there are catastrophic life-changing injuries.

Flood insurance

Stacey A. Giulianti, Esq., CLO of Florida Peninsula Insurance Company

One of the most overlooked forms of insurance for residential property owners is flood insurance — even in areas that are not considered ‘flood zones.’ Almost one of every four flood claims occur in areas not designated as flood zones. Flooding is the number one natural disaster in the United States, and it’s not covered under the standard homeowners insurance policy. According to FEMA, 5 inches of water in a home will cause more than $11,000 worth of damages.

Renters insurance

Colby Hager, owner of Capstone Homebuyers

I am a real estate professional who buys houses and owns and manages rental properties. As someone who manages rental properties, one often overlooked insurance need is renters insurance. This is generally not required insurance, which is why it is commonly overlooked. However, tenants' belongings are not covered by the owners' property insurance. In the event of a flood, natural disaster, burglary, fire, or other mishaps, the tenants' belongings would be at risk. Generally speaking, a renters policy is relatively low cost and can provide a great deal of peace of mind should an accident or other event occur.

Travel insurance 

Joel Ohman, CEO, CFP® and founder of Insurance Providers

One type of insurance that is often overlooked is travel insurance. Conversely, sometimes people buy travel insurance when they don't need [it.] … Unless you are well familiar with the benefits you already enjoy with any of your other current insurance policies, credit card benefits, membership programs, etc., then you could potentially end up buying a policy that has some duplication of benefits with what you already have.

The vast majority of typical major medical health insurance policies only offer a travel insurance element to the extent that it involves emergency care. There are usually very restrictive provisions on what is and isn't covered, so those who are planning to travel would do well to purchase a separate travel insurance policy with the specific benefits that they are looking for.

Some of the things to look for in a travel insurance policy include the following major types of travel insurance coverage: major medical, accident, evacuation (immediate transport home in the event of a major illness or accident), and trip cancellation/interruption. Each of these different elements can be purchased separately or combined as a package policy.

One major pro to purchasing a comprehensive travel insurance policy is simply peace of mind. 

Pet insurance

Sara Ochoa, DVM, veterinarian and veterinary consultant for DogLab

Pet insurance is a great thing to have for your pets. There are different plan types. Some just cover accidents and illnesses, and some cover wellness, also. If you get a plan that covers everything, usually it pays for itself.

If your dog is ever in an accident or gets sick, it will be a great thing to have. Some major surgeries and hospitalizations for illness can be very costly. Pet insurance can help your $2,000 to $3,000 dollar bill go down to a few hundred.

Bottom Line

When life happens, make sure you’re covered. So take a look and find the right type of insurance to fit your needs. 

Article contributors

Logan Allec is a CPA, personal finance expert, and owner of the website Money Done Right.  After spending his twenties grinding it out in the corporate world and paying off more than $35,000 in student loans, he dropped everything and launched Money Done Right in 2017. His mission is to help everybody — from college students to retirees — make, save, and invest more money. He currently resides in the Los Angeles area with his wife Caroline and son Hunter.

Jason Fisher is the founder and CEO of, one of the nation's largest and independent consumer resources for life insurance. Licensed in more than 30 states, Fisher has a particular interest and experience in estate planning, business continuation plans, and other advanced cases. It's his goal to provide a personalized approach to understanding life insurance, whether working directly with clients or providing the platform for them to shop independently.

Stacey A. Giulianti, Esq. is the chief legal officer at Florida Peninsula Insurance Company, where he oversees the claims, special investigations, and legal departments. He founded the company with his partners in 2005 and has since helped it grow to become the 6th largest homeowners insurance company in Florida. Giulianti graduated from the University of Miami School of Law cum laude and has been a member of the Florida Bar since 1993. He is the author of Florida Insurance Law

Colby Hager, owner of Capstone Homebuyers in San Antonio, TX, and has been a professional real estate investor since 2007. After graduating from Texas A&M University, he relocated to San Antonio and began buying and renovating dilapidated houses. He has worked with the City of San Antonio’s Office of Historic Preservation to keep remodels period-appropriate. He also owns and manages a portfolio of residential rental property including single-family and multifamily housing.

Joel Ohman is a certified financial planner™ based in Tampa, FL, and the founder of

Sara Redding Ochoa, DVM, graduated from St. George’s University with a Doctorate of Veterinary Medicine in 2015. Since veterinary school, she has worked at a small animal and exotic veterinary clinic in east Texas, where she has experience treating a wide range of different animals. She currently sits on the advisory board for DogLab.

Prosper Shaked is a personal injury attorney and owner of The Law Offices of Prosper Shaked located in Miami, FL. Shaked is a former criminal prosecutor who now represents individuals who have suffered catastrophic injuries recover damages from large insurance companies. He often represents individuals who have been unlawfully denied insurance benefits or have been treated unfairly by their insurance carriers.

Michael Z. Stahl serves as executive vice president of HealthMarkets — one of the nation’s largest independent insurance agencies in the Medicare; individual; and supplemental health, life, and small group insurance markets. He has a bachelor’s degree in economics from The Wharton School, University of Pennsylvania and holds the chartered property casualty underwriter (CPCU), associate in insurance accounting and finance (AIAF), and associate in reinsurance (ARe) designations. An avid Kansas City Royals fan, he lives in Dallas with his wife and children.

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