The FIVE WONDERS

5 Insurance Policies Worth Having

This story was originally published on AOL on Sept. 8, 2008.

These days, it seems as if there's an insurance product for everything -- engagement rings, babies, even pets. The tricky part for consumers is choosing which policies are truly worthwhile -- and which ones will never pay off. One rule of thumb:

The insurance that's worth it typically covers your health, your earning power or the assets you've accumulated, including your car or your home. Here are five types of insurance policies everyone should consider:

Health Insurance

Just because you eat veggies and hit the gym regularly doesn't mean you're immune to an illness, or won't have an accident.

Everyone requires medical help at some point and if you don't have insurance, the resulting bill is going to be painful. Deliver a baby -- without complications --and expect to fork over an average of $10,000, says Matt Tassey, former chairman of the Life and Health Insurance Foundation for Education (LIFE). Get diagnosed with cancer and the expenses can go into the million-dollar range, says Lorne Zalesin, CEO of My Insurance Expert.com, which offers free quotes for individual health-insurance policies.

If your employer doesn't offer coverage in a group plan, look into an individual policy. Just be aware that private health insurance typically requires holders to pay higher premiums than they would with a group plan. And coverage may be more limited. To find the right individual plan, visit your state's insurance department web site, which often lists area insurance providers, and web sites like eHealthInsurance.com and MyInsuranceExpert.com for free quotes.

Visit our worksheet for more on choosing the best health plan.

Disability Insurance

Few people like to imagine the worst-case scenario, but Scott Simmonds, a Saco, Maine-based insurance consultant, makes a practice of it. He knows that one major accident could keep a person out of work for months or even years. Even worse: those without disability insurance could face bankruptcy. (Even though Simmonds doesn't sell disability insurance, he still recommends it.)

Disability insurance replaces a portion of up to 60% or 70% of lost income if the policyholder can't work due to an illness or injury. Often times, companies pay for employees’ disability insurance, or offer it as a voluntary benefit that employees pay for. Individuals can also buy their own policy, although the premiums will cost around 15% more, says Simmonds.

Shop around carefully. These policies are very complicated, can include many caveats, such as what qualifies as a disability, and can be hard to land on your own. Also, costs will vary based on an individual's income and type of coverage. If your employer doesn’t offer adequate coverage, contact independent insurance agents who can provide you with a range of policies, says Simmonds.

For more on disability insurance, read our story.

Auto Insurance

What good is a shiny, new sports car if a fender bender will put you in the poor house?

States require different minimum amounts of auto insurance, but it's not enough to take care of things when they really count. Every driver should invest a little extra in comprehensive and collision coverage, especially if their car is less than 10 years old, says Claire Wilkinson, vice president of global issues at the Insurance Information Institute. (For cars older than that, the cost of coverage can be more expensive than the car's value.) Comprehensive coverage protects a car from vandalism, natural disasters like a storm or a tree falling on it, and most other damages -- excluding collisions. That's where collision insurance comes in. It helps pay for repairs to or replacement of a car if it's involved in an accident with another vehicle.

Read our story here for more tips on determining the type of auto insurance you may need.

Homeowner's or Renter's Insurance

Protecting your home against theft, fire or hurricanes may not help you salvage lost memories or replace rare family heirlooms, but it will certainly help you get back on your feet.

Homeowner's insurance covers the house and everything in it, while renter's insurance covers all of a tenant's personal belongings that are in their home. The best part is that these policies are relatively cheap.

When shopping around, look for one that includes personal liability, which pays for medical expenses should someone become injured on the property or if, say, you accidently start a fire in your landlord's building. Also, look for a "special perils policy" that covers all major catastrophes except a flood, earthquake, nuclear attack, and some others, says Simmonds. (This could increase the premium by 2% to 3%, he says.) A named perils policy, covers fewer disasters.

Read our story here for more tips on how to protect your home.

Life Insurance

No matter how little gray is in a person's hair, anyone who has dependents, be it a spouse, children or aging parents, should buy life insurance, says Tassey. If they pass away, then their beneficiaries will likely receive the policy's benefits tax-free, he says.

Easy enough, but here’s where it gets tough: Deciding between term and whole life insurance policies. A term policy offers life coverage only, and is typically offered in terms of 10, 20 or 30 years. A whole life policy offers life coverage with an investment component, and it can last until you're 100.

For most people, the better choice is a term policy. Premiums are usually less expensive than that of a whole life policy, says Simmonds. Term insurance can be as little as 10% to 30% of the cost of whole life insurance, although this can vary on a case by case basis, says Tassey.

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