5 Types of insurance in US

We have already talked about the three (3) main types of insurance in our previous article, however in this article we are going to be location specific as it affects the US (United States of America); this is why we will be considering the types of insurance in US.

In this article, we will highlight the most patronized type of insurance in the US.

Before we continue, it is worthy to note that the first insurance company in the United States underwrote fire insurance was formed in Charleston, South Carolina, in 1735. In 1752, Benjamin Franklin helped form a mutual insurance company called the Philadelphia Contributionship, which is the nation’s oldest insurance carrier still in operation. Franklin’s company was the first to make contributions toward fire prevention. Not only did his company warn against certain fire hazards, it refused to insure certain buildings where the risk of fire was too great, such as all wooden houses.

Types of insurance in US

A common typology of insurance in the United States is to divide the industry into life and health insurers, on the one hand, and property and casualty insurers on the other:

  • Life, Health
    • Health (dental, vision, medications, others)
    • Life (long-term care, accidental death and dismemberment, hospital indemnity)
    • Annuities (securities)
    • Life and Annuities
  • Property and Casualty (P & C)
    • Property (flood, earthquake, home, auto, fire, boiler, title, pet)
    • Casualty (errors and omissions, workers’ compensation, disability, liability)

Reinsurance is usually treated as a separate category from the above types.

So in general terms, the types of insurance prominent in the US could be listed as follows:

  1. Life Insurance
  2. Health Insurance
  3. Property Insurance:
  • Renters insurance
  • Home insurance
  • Auto insurance


Life Insurance: 

Life Insurance can be defined as a contract between an insurance policy holder and an insurance company, where the insurer promises to pay a sum of money in exchange for a premium, upon the death of an insured person or after a set period. In Life Insurance, you pay premiums for a specific term and in return.

The sum of money which is known as the life cover helps to secure your family’s future needs by paying them a lump sum amount in case of a death of the policyholder. However, in many life insurance policies, the insured are paid an amount called maturity benefit which is generally provided at the end of the policy term.

This Life Cover secures your loved ones’ future by paying a lump sum amount in case of an unfortunate event. In some policies, you are paid an amount called Maturity Benefit at the end of the policy term.


Health Insurance:

Health insurance is a type of insurance that helps cover the cost of an insured person’s medical and surgical expenses. There are different types of health insurance in the USA.

Insurers use the term “provider” to describe a clinic, hospital, doctor, laboratory, healthcare practitioner, or pharmacy that provides treatment for an individual’s condition.

The “insured” is the owner of the health insurance policy or the person with the health insurance coverage.

Depending on the type of health insurance coverage a person has, either the insured pays costs out of pocket and receives reimbursement, or the insurer makes payments directly to the provider.

In countries without universal healthcare coverage, such as the United States, health insurance is commonly included in employer benefit packages.

Still wondering if you should get health insurance, here are 5 reasons why you should not go without one this year.

1. You never know when you might get sick

No one plans to get sick or hurt, but you will definitely need medical care at some point. It’s easy to think that you don’t need health insurance when you are healthy, but unfortunately, accidents can happen to anyone. By getting a health insurance cover, you are getting security for you and your family for any unforeseen medical or health issues that may arise.

2. Save on medical bills

By opting for a health insurance policy, you can ensure your health never gets in the way of your finances. You may be healthy now, but the onset of a sudden or serious illness or a traumatic event can leave you with staggering medical bills. Health insurance does not just protect your health, it also protects your wallet. No matter what type of insurance you have, you are able to save money on appointments and medications covered by your plan.

3. Get preventive, routine or long-term care

Having a health insurance cover guarantees you benefit from preventive measures like screenings and vaccines, routine check-ups as well as emergency treatment covered by your insurer who has your medical history on their database and can provide it to any hospital you specify. This also guarantees you continuity of treatment for long-term conditions.

4. Access to better health care and other benefits

A key feature of health insurance plans is the list of benefits it affords. There is a link between having health insurance and getting better health care. People with health insurance can get access to a variety of regular health care services that they would otherwise have paid heavily for, when and where they need it. From free ambulance services to specialized emergency treatment and even regular medical consultations, health insurance plans provide more value-added services than the alternative would at reduced costs.

5. Protection from unexpected, high medical costs

Having to pay out-of-pocket every time a hospital emergency arises, say to fix a broken leg, for example, can be costly especially when it requires a long hospital stay. Buying health insurance means that you will not have to take on the burden of these risks alone.

We invest in areas of our lives that are important to us. We invest in our education, in our talents, in our families, and in our homes. Since we need our health to take advantage of the great things we love, it is important that we invest in a health insurance plan, to ensure that no critical health status impairs your financial independence.


Home Insurance:

Home insurance also known as homeowners insurance policy is a multiple-line insurance policy, meaning that it includes both property insurance and liability coverage, with an indivisible premium, meaning that a single premium is paid for all risks. This means that it covers both damage to one’s property and liability for any injuries and property damage caused by the owner or members of his/her family to other people. It may also include damage caused by household pets. The U.S. uses standardized policy forms that divide coverage into several categories. Coverage limits are typically provided as a percentage of the primary Coverage A, which is coverage for the main dwelling.

A homeowners insurance policy usually covers four kinds of incidents on the insured property: interior damage, exterior damage, loss or damage of personal assets/belongings, and injury that occurs while on the property. When a claim is made on any of these incidents, the homeowner will be required to pay a deductible, which in effect is the out-of-pocket costs for the insured.


Renters Insurance:

Renter’s insurance refers to property insurance that protects tenants who live in a rented dwelling. Coverage is provided by insurance companies in exchange for premiums paid by people living in apartments, single-family homes, and condominiums. Policies provide coverage for an insured party’s personal property as well as liability claims that are not due to a structural problem with the property. These kinds of policies also cover living expenses that need to be paid out when someone makes an insurance claim after their unit is damaged. Although renter’s insurance isn’t a legal requirement, some landlords prefer their tenants to have some type of coverage.

Here is how renters insurance function – You will pay your insurance company a premium each month or yearly in exchange for the protection that renters insurance provides. Your location, the amount of coverage you purchase, your claim history, and other factors all impact your premium.

If you file a claim, your renters insurance company may pay you for any covered losses that are greater than your deductible, which is the amount you must pay before your insurer will compensate you.


Auto Insurance:

Auto insurance is a contract between you and the insurance company that protects you against financial loss in the event of an accident or theft. In exchange for your paying a premium, the insurance company agrees to pay your losses as outlined in your policy.

Auto insurance provides coverage for:

  • Property – such as damage to or theft of your car
  • Liability – your legal responsibility to others for bodily injury or property damage
  • Medical – the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses

Basic personal auto insurance is mandated by most U.S. states, and laws vary. Auto insurance coverages are priced individually (a la carte) to let you customize coverage amounts to suit your exact needs and budget.

Policies are generally issued for six-month or one-year timeframes and are renewable. The insurance company sends a notice when it’s time to renew the policy and pay your premium.

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