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What Can DCU Save You?

Types of Insurance

StreetWise Insurance Guide

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Types of Insurance

Homeowners and Renters Insurance

Homeowners insurance covers damage to your home and your personal belongings from hazards spelled out in the policy. It also covers your liability for any injuries and property damage that you or your family members (including household pets) cause to other people.

Renters insurance covers only the value of your belongings not the physical building. Losses typically covered include fire or smoke, lightning, vandalism, theft, explosion, windstorm and water damage but not flood damage.

Flooding is not covered by homeowners or renters policies. It has to be purchased separately and can be bought for building only, contents only, or a combination of the two.

If the home you own is a condominium or a cooperative, then your insurance policy covers your personal property and liability. It should also cover any of the structural elements not covered by the association's “master policy.”

The chapter Homeowners and Renters Insurance in this guide provides more information.

Auto Insurance

Auto insurance provides financial protection if an accident damages your vehicle, you are injured in a crash, or your vehicle is involved in injury or damage to another individual or vehicle. It can provide property, liability, and medical coverage.

Automotive gap insurance, also known as Guaranteed Asset Protection (GAP), pays the difference between what you owe on the vehicle (whether you are buying or leasing) and the cash value of the vehicle in the event that the vehicle is “totaled” in an accident or stolen.

See Auto Insurance in this guide for more information on these types of automotive insurance.

Life Insurance

Life insurance provides the payment of a set sum to the policy's beneficiaries upon the death of the insured. Life insurance can provide a way to provide income to your dependents if you die early. It can also play a role in retirement and estate planning. Life insurance is available in several types:

  • Term insurance covers a policyholder for a specific period of time. It's the simplest form of life insurance. It provides a death benefit, but not any additional cash value.

  • Permanent life insurance provides lifelong protection. As long as the premiums are paid, the death benefit will be paid. Most of these policies provide cash value (also called a cash surrender value). The cash value is different from the face amount—which is the death benefit. Whole life, universal life, and variable life are types of permanent insurance.

You'll find more information about term and permanent life insurance in the Guide's chapter Life Insurance.

  • Annuities are financial contracts with an insurance company designed to be a source of retirement income. They can be purchased in two ways: single-premium or flexible-payment. The return on annuities may be fixed or variable. Payment may be deferred to a future date or begin immediately. Because annuities are marketed primarily as an investment vehicle, our Life Insurance chapter contains only a brief overview.

Accidental Death & Dismemberment Insurance

Accidental death & dismemberment (AD&D) insurance pays if you are killed or disabled as a result of injuries in an accident that is covered by the policy. The types of injuries or disabilities and the types of accidents covered are very specifically identified in the policy. Individuals may purchase a stand-alone AD&D policy or add it as a rider to a heath insurance policy or another life insurance policy. You'll find more information in Life Insurance.

Health Insurance

Health insurance is the broad term for insurance that provides protection against financial loss from sickness or injury. Many health insurance plans also cover preventive or “wellness” procedures designed to help beneficiaries stay healthy or catch health problems early.

Health insurance coverage may include medical expense insurance, major medical insurance, hospitalization and surgical expense, prescription drug insurance, dental expense insurance and vision care insurance. Medicare insurance for seniors and specialty insurance such as “cancer insurance” also fall under the category of health insurance. Health insurance policies vary widely in the options and coverage they offer as well as the ways in which they pay for service.

Our chapter on Health and Medical Insurance in this guide provides a more detailed discussion of many typical kinds of health or medical insurance, including such types of plans as fee-for-service, HMOs, and PPOs.

Long-Term Care Insurance

Long-term care insurance may pay for the services you need should you be unable to care for yourself due to illness or injury. Services may include help with activities of daily living (bathing, dressing, eating, etc.), home healthcare, respite care, adult day care, nursing home, or assisted living facility. Premiums depend on your age and the level of benefits you buy.

Health and Medical Insurance in this guide provides more information.

Disability Insurance

Disability insurance provides you with a monthly income if you are sick or injured and cannot work. Long-term disability insurance typically covers periods of five years and beyond. Short-term disability insurance typically provides benefits for up to two years. All types have a waiting period before the benefits are paid. Premiums are determined by your age, health, whether your job is considered risky, and the amount of potential lost income you are trying to protect.

The chapter Disability Insurance in this guide provides more details.

Umbrella Liability Insurance

Umbrella liability insurance (also called personal excess liability) provides personal liability coverage above the amount provided by your auto and homeowners insurance policies. It also covers claims that aren't covered by those policies. Umbrella Liability Insurance provides more details.

Credit Insurance

Credit insurance offers coverage that pays off or makes payments on a specific debt such as a mortgage, loan, or credit card account in the event of the policyholder's death, disability, or involuntary job loss. In other words, the contract insures the debtor for the benefit of a specific creditor. Credit Insurance details the options in this area.

Specialty Insurance

This category covers a broad range of property and casualty insurance policies not covered in other categories. A sampling of more common types of personal specialty insurance (as opposed to business specialty insurance) includes travel insurance, car rental insurance, flight insurance, pet insurance and computer insurance. Our Specialty Insurance chapter briefly profiles the most common types.

Identity Theft Insurance

As the incidence of identity theft has grown rapidly in recent years, a market has emerged for identity theft insurance. A type of specialty insurance, identity theft insurance covers the time and money you spend restoring your identity and repairing credit reports if your identity is stolen. Covered items may include attorney fees, mailing costs, reapplication fees, phone charges, and lost wages for time taken off from work to deal with identity recovery. These policies don't provide reimbursement for fraudulent credit card charges. You should check your card and account disclosures, though. At most financial institutions, you are not liable for fraudulent use of your account if you report it.

Identity theft insurance can be obtained as a separate policy, as a rider to your homeowners, renters, or condominium policy, or possibly from your employer. Additional information is provided in Specialty Insurance.