Insurance is the process of transferring the risk of a large financial loss to a company willing to pay for the loss in exchange for a small guaranteed payment. As such, insurance can exist for just about anything in every industry; there are as many different types of insurance as there are items to be insured. Most consumers will work with only a handful of insurance types to satisfy all of their insurance needs.
In the case of protecting a vehicle, you can get insurance to safeguard against the unforeseen. Auto insurance pays for damages arising out of a loss involving your automobile. Depending on how you build your policy with your agent or broker, your auto insurance policy may pay for injuries you cause to other people, damage you cause to others' property, medical payments to you and your passengers, and damage to your car caused by collision or other types of loss. If your vehicle is deemed a total loss and your insurance policy is current, your provider will have to pay you its value depending upon your specific policy.
Homeowners insurance pays for losses relating primarily to your home. Homeowners insurance companies agree to pay for damage to your home, secondary structures on your property and your belongings in the event of loss. In addition, many policies pay for additional living expenses if you must live elsewhere after a covered loss. Finally, the liability portion pays for injuries sustained on your property as well as injuries and damage you may cause while off premises, such as while rollerblading or riding your bike, depending upon the policy you select.
Read More: What Does Homeowners Insurance Cover?
Umbrella insurance is named as such because it sits like an umbrella on top of your existing auto and home liability insurance policies. It extends the liability limits you already have by the amount purchased under the umbrella policy. These policies are typically sold in increments of $1 million.
Life insurance pays an agreed-upon benefit at the time the insured person dies. Some policies make a portion of the benefit available to you when you are diagnosed with a terminal illness. This type of insurance is designed to pay for financial burdens your death leaves behind, such as funeral expenses, mortgages and other debts, as well as for future expenses such as college education and maintaining your family's standard of living.
Common types of insurance contracts include auto insurance, homeowners insurance, life insurance and umbrella insurance.