# Breaking Down the Types of Insurance You Need Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2021-10-11 Category: INSURANCE Category URL: https://financedigest.com/category/insurance Meta Title: Understanding Home and Auto Insurance Basics Meta Description: Confused about insurance? Our guide breaks down home and auto insurance to help you make informed decisions. Don't get lost in the jargon, let us simplify URL: https://financedigest.com/breaking-down-the-types-of-insurance-you-needhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/insurance-sbi-300189602-1736837689644-compressed.jpg) _Has shopping around for insurance policies got you going cross eyed? If you’re having trouble understanding exactly what you’re paying for, take a look at our guide for the three most basic and vital forms of insurance._ Shopping around for insurance can be confusing, with salesmen throwing terms at you you’ve never heard in another context and a lot of chat about “should the worst happen” overwhelming you. Before you go looking for a policy, take a look at the breakdown of the [types of insurance](https://www.financedigest.com/types-of-insurance-for-yourself-and-your-family.html "Types Of Insurance For Yourself And Your Family") available to you so you can make an informed decision. [**Home insurance**](https://www.financedigest.com/what-is-the-difference-between-a-home-warranty-and-home-insurance.html "What is the Difference between a Home Warranty and Home Insurance?") Looking after the building you live in, and its contents is the basis of [home insurance](https://www.financedigest.com/uk-motor-and-home-insurers-headed-for-heavy-losses-ey-warns.html "UK motor and home insurers headed for heavy losses, EY warns"). It covers three main aspects: damage to the interior or exterior of your house, [personal liability for damage or injuries](https://www.financedigest.com/double-taxation-of-personal-injury-plaintiffs.html "Double Taxation of Personal Injury Plaintiffs") and hotel or house rental while your home is being repaired. Damage due to fire, hurricanes, lightning, vandalism, and a few other options, are the common causes [covered by your home insurance](https://www.financedigest.com/japan-insurers-to-maintain-cover-for-lng-vessels-in-russian-waters.html "Japan insurers to maintain cover for LNG vessels in Russian waters") policy. Your [insurer will compensate you if you need](https://www.financedigest.com/reasons-you-need-a-car-insurance-when-driving-in-thailand.html "Reasons You Need a Car Insurance When Driving in Thailand") to repair or rebuild your home after one of these, however some things like flooding, earthquakes and poor home maintenance aren’t covered and will need a separate policy. Your material possessions like clothing, furniture, appliances, and most other contents will be [covered if they’re lost in a disaster covered by your insurer](https://www.financedigest.com/app-based-insurance-cover-for-millennials-possessions-and-experiences-back-me-up-powered-by-ageas.html "APP-BASED INSURANCE COVER FOR MILLENNIALS’ POSSESSIONS AND EXPERIENCES: ‘BACK ME UP’, POWERED BY AGEAS"), but usually up to a limit. [Liability coverage](https://www.financedigest.com/what-is-premises-liability-coverage-and-why-does-your-business-need-it.html "What is Premises Liability Coverage … and Why Does Your Business Need It?") will protect you from lawsuits should you be at fault for something like your dog biting someone or a neighbor’s window broken by a stray ball, for example. Your [insurance will cover](https://www.financedigest.com/how-insurance-providers-are-starting-to-use-adas-data-to-price-cover.html "How insurance providers are starting to use ADAS data to price cover") the medical bills or repairs. There is a low chance a disaster will force you and your [family out of your home](https://www.financedigest.com/family-homes-in-colchester-countryside-coming-soon.html "Family Homes In Colchester Countryside Coming Soon") while it is being rebuilt or repaired. Your [insurance will cover the bills and a daily allowance to live](https://www.financedigest.com/as-the-cost-of-living-bites-tackling-insurance-quote-manipulation-is-key.html "As the cost of living bites, tackling insurance quote manipulation is key") in a hotel or rent another location. **Auto insurance** Now that you know [what is home insurance](https://www.lemonade.com/blog/what-is-homeowners-insurance/), auto insurance, put simply, offers to pay all or part of the costs of an accident, theft, or other cause of damage to your vehicle. [Liability insurance](https://www.financedigest.com/are-you-getting-what-you-are-paying-for-when-it-comes-to-cyber-liability-insurance.html "ARE YOU GETTING WHAT YOU ARE PAYING FOR WHEN IT COMES TO CYBER LIABILITY INSURANCE?") is the most basic package and is required to be allowed to drive. It will cover repairs to damages you cause to other drivers and vehicles: property repairs and [medical bills](https://www.financedigest.com/medical-debt-management-negotiating-and-managing-healthcare-bills.html "Medical debt management: negotiating and managing healthcare bills"). It is a necessity since, due to a rule known as “comparative negligence” both drivers in most accidents are deemed to share the responsibility. Collision [insurance will help you to repair or replace your car](https://www.financedigest.com/5-tips-for-selecting-the-best-car-insurance-coverage.html "5 Tips for Selecting the Best Car Insurance Coverage") if you are in an accident, the main benefit being that it will cover you even if the accident was your fault, but at a higher price than liability coverage. Comprehensive coverage covers “everything else”. Usually optional, it covers unexpected events like windshield damage, fire, vandalism, falling objects, storms and [natural disasters](https://www.financedigest.com/global-natural-disaster-losses-reach-45bn-during-1h-2018-insurance-payouts-estimated-at-21bn-according-to-aon-catastrophe-report.html "Global natural disaster losses reach bn during 1H 2018; insurance payouts estimated at bn, according to Aon catastrophe report"), or accidents with animals. There is also uninsured and underinsured motorist coverage, which will pick up the bill if the [driver at-fault doesn’t have enough insurance](https://www.financedigest.com/how-iot-is-reducing-insurance-premiums-for-smart-drivers.html "How IoT is reducing insurance premiums for smart drivers") to cover the damage, and personal injury protection, which will cover your medical bills. Personal injury protection will also cover lost wages, rehabilitation costs and funeral costs if necessary. However, auto [insurance will not cover damages caused by someone else driving your car](https://www.financedigest.com/ten-things-youre-doing-that-are-invalidating-your-car-insurance.html "TEN THINGS YOU’RE DOING THAT ARE INVALIDATING YOUR CAR INSURANCE") or routine maintenance and vehicle repairs, crucially. It also won’t cover exotic or vintage cars, or damages that exceed your liability coverage. [**Life insurance**](https://www.financedigest.com/types-of-life-insurance.html "Types of Life Insurance") [Life insurance is a policy designed](https://www.financedigest.com/london-boroughs-brought-to-life-in-stunning-illustrated-bathroom-designs.html "London Boroughs brought to life in stunning illustrated bathroom designs") to guarantee your loved ones are kept well with a sum of money after you are gone in exchange for premiums paid throughout your lifetime. Term life [insurance](https://www.financedigest.com/life-insurance-why-is-it-so-important.html "LIFE INSURANCE: WHY IS IT SO IMPORTANT?") is a policy with an end-date and is usually a lot less expensive than permanent life insurance. You can choose the term when you take out the policy, usually of 10, 20, or 30 years. You can choose a decreasing term policy with the coverage decreasing over the life of the policy, a convertible term policy which allows the policyholder to convert to permanent [insurance or a renewable term policy which provides a quote for the year the policy was purchased](https://www.financedigest.com/uk-consumers-conflicted-when-purchasing-insurance.html "UK Consumers Conflicted when Purchasing Insurance") and will increase annually. Permanent life [insurance](https://www.financedigest.com/life-insurance-for-seniors-can-be-a-costly-mistake.html "Life Insurance For Seniors Can Be A Costly Mistake") is an ongoing policy for the policyholder’s entire life unless they stop paying or surrender the policy. You can choose from whole life, [universal life](https://www.financedigest.com/birmingham-the-perfect-city-for-students-who-want-to-make-the-most-of-their-university-life.html "Birmingham: the perfect city for students who want to make the most of their University life"), indexed universal and variable universal policies and don’t worry if you don’t understand any of those terms. [Whole life insurance](https://www.financedigest.com/scratched-ev-battery-your-insurer-may-have-to-junk-the-whole-car.html "Scratched EV battery? Your insurer may have to junk the whole car") accumulates cash value, which allows the policyholder to use it as a source of loans or cash. Universal life also accumulates [cash value](https://www.financedigest.com/funeral-plan-investments-four-times-better-value-than-a-cash-isa.html "Funeral plan investments FOUR TIMES better value than a cash ISA"), but with interest and features flexible premiums. Payments can be adjusted over time and designed with a level of death benefit or [increasing](https://www.financedigest.com/benefits-of-increasing-blog-traffic-with-guest-blogging-and-posting-service.html "Benefits of Increasing Blog Traffic With Guest Blogging and Posting Service") death benefit. Indexed universal policies allow the policyholder to earn a rate of [return on the cash value component of their policy and variable universal policies allow the policyholder to invest](https://www.financedigest.com/ils-investment-returns-continue-to-outperform-according-to-aon-insurance-linked-securities-report.html "ILS investment returns continue to outperform, according to Aon insurance-linked securities report") their cash value in a separate account. Like universal life policies, it also has [flexible premiums and can be designed for a level or increasing](https://www.financedigest.com/increasingly-flexible-working-patterns-drive-up-it-and-technology-spend-across-europe.html "Increasingly Flexible working patterns drive up IT and technology SPEND across europe") death benefit. **This is a Sponsored Feature** --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---