Insurance coverage is important in essentially any case where you can find yourself paying large, unexpected costs. Health is first and foremost: Care is expensive, and you cannot live without it. Next is your life: Unexpected death is already an emotional burden for family members, and you do not want to make it a financial one as well. Finally, your car and your house can be subject to large unexpected costs.
Health Insurance
Your health is the most important thing you have. While there are other insurance options to cover your health care, such as some auto insurance and worker compensation programs, these are specific to circumstances--if you get a life-threatening disease, your auto insurance is not going to cover your hospital bills.
Health-care costs are on the rise, with surgeries costing thousands of dollars, so health insurance is very important to ensure that these always unexpected costs can be handled by you and your family.
Life Insurance--Funeral
The first reason life insurance is important is fairly clear-cut: Death is often unexpected and funerals are expensive. Even if nobody depends on your income, somebody is going to have to pay for your funeral, which, like surgery, can cost thousands of dollars. Life insurance can save someone from this financial hassle during a time of already great emotional turmoil.
Life Insurance--Income
Life insurance is also important if others depend on your income. If you have a spouse or children you provide for, you are going to need to provide for their financial security in the event of your death. A good rule of thumb is "20 times your pretax income." The reason for this is that if the money is invested in a low-risk annuity that pays 5 percent per year, the interest income will be equal to what your income was when you were alive.
Auto Insurance
Most people in North America have cars. Cars come with unexpected costs, especially if you get in an accident. What's more, if you cause a car accident you can be liable for not only the repair of your car but also anyone else who was involved--this includes auto repair and bodily injury. Finally, it is illegal to drive without auto insurance in North America.
Homeowners and Renters
These kinds of insurance are important because they protect your house. Again, like auto insurance, they also cover liability, which is particularly important when it comes to renters--if you cause a great deal of damage to a house that you do not own, you can be forced to pay if you do not have insurance. Homeowners' insurance also covers your belongings, whether they are in the house or not, and pays for alternative accommodation should something happen to your house.
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