What are the most common types of insurance?

Individuals and businesses searching for some form of financial protection can choose from a diverse range of insurance policies, with each catering to different clients’ unique set of coverage needs. This section details what the most popular types of insurance available in the market cover.

Auto insurance

To operate a vehicle, it is almost always mandatory to carry car insurance. Getting caught driving without one can result in hefty fines and affect future eligibility for obtaining coverage.

Auto insurance is designed to protect motorists against financial losses in the event of accidents or theft. It does so by providing the following coverages:

  • Bodily injury liability: Covers injuries the driver causes another person and legal fees if they are sued over the accident.
  • Property damage liability: Pays out if a vehicle damages another person’s property and legal defence costs incurred in a lawsuit. 
  • Combined single limit (CSL) liability: Provides one overall limit for bodily injury and property damage claims against the policyholder rather than having two separate limits.
  • Personal injury protection (PIP): Covers medical expenses for the driver and the passengers, resulting from accidents covered by the policy. In the US, PIP is required by law in no-fault insurance states.
  • Collision insurance: Pays for damage to the vehicle in the event it hits or gets hit by another car or object.
  • Comprehensive insurance: Provides coverage for damages to the vehicle resulting from fire, flood, theft, vandalism, and other covered perils.
  • Uninsured motorist (UM) coverage: Pays out for injuries the driver and their passengers suffer if they are hit by an uninsured driver.
  • Underinsured motorist (UIM) coverage: Covers medical expenses incurred when the driver or passengers of a vehicle are hit by someone whose policy is not enough to cover all the costs.

There are a number of factors which go into choosing which type of insurance is required, often coming down to legislation in different countries, and even in different provinces and states within those countries.

Home insurance

Home insurance, also referred to as homeowners’ insurance, is not required by the law. Most lenders, however, set it as a condition for taking out a mortgage. Homeowners’ insurance may work differently, depending on several factors, including where the house is located, but most offer the following coverages: 

  • Property damage: Pays out for any physical damage or loss to the house and other structures within the property’s premises – such as sheds, garages, and fences – if this was caused by a covered peril, which can include fire, wind, hail, or vandalism.
  • Personal property: Covers personal possessions such as clothing, smartphones, furniture, jewelry, and other household items that were damaged or lost due to specified perils.
  • Liability: Pays out for lawsuits and other legal expenses stemming from injuries to other people while on the property or its premises.
  • Loss of use: Covers hotel stays, restaurant meals, and other living expenses should the policyholder need to relocate elsewhere because the property is under repair and uninhabitable.
  • Medical payments: Often grouped with liability, this coverage pays out for injuries sustained by guests while on the property, regardless of who is at fault.

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