Insurance
Insurance is for the losses you couldn't pay for yourself. Here's what's worth buying, what usually isn't, and how much life insurance you'd need.
Last reviewed October 2026
Insurance by the Numbers
Where Americans are covered - and where they often aren't.
About 26.7 million people had no health insurance at any point in the year. Most people with coverage get it through an employer.
Source: U.S. Census Bureau, 2026
The highest of any age group - often right after aging out of a parent's plan or between jobs. You can usually stay on a parent's plan until 26.
Source: U.S. Census Bureau, 2026
About 52% of adults own a policy, but many say they don't have enough - and people under 31 tend to guess term coverage costs several times what it really does.
Social Security's actuaries put the odds at 24% for a worker turning 20 in 2025: about 1 in 4 will become disabled before full retirement age. Your income is usually your biggest asset.
Source: SSA Actuarial Note 2025.6
Core Concepts
Six ideas that cover most of what a beginner needs to know.
Insure the big stuff, save for the small stuff
You pay a premium so the insurer covers losses that would wreck your finances: a hospital stay, a car crash you caused, a house fire. Small, predictable costs are cheaper to cover yourself from an emergency fund. That's also why a higher deductible can make sense once you have savings - it usually lowers the premium.
Health insurance
Most people get it through work. If you can't, the Marketplace at HealthCare.gov (or your state's site) has an open enrollment period each fall, plus special enrollment after events like losing a job or moving. Compare plans by the out-of-pocket maximum and deductible, not just the premium. A high-deductible plan can come with an HSA - see Retirement.
Auto insurance
Almost every state requires liability coverage, which pays for damage and injuries you cause to others. State minimums are often low compared to what a serious accident costs, so many people buy more. Collision and comprehensive cover your own car - required if you have a loan or lease, optional on an older car you own outright. Shop around every year or two; prices for the same driver vary a lot between insurers.
Renters and homeowners
Your landlord's policy covers the building, not your stuff. Renters insurance covers your belongings and your liability if someone is hurt at your place, and it's usually one of the cheapest policies you'll buy. Mortgage lenders require homeowners insurance. Neither usually covers floods or earthquakes - those are separate policies. More on owning on Real Estate.
Life insurance - only if someone depends on you
If nobody relies on your income, you may not need it at all. If a partner or kids do, term life - coverage for a set number of years, like 20 or 30 - is usually the cheapest way to protect them. Whole life costs many times more for the same payout. Coverage through work is often only 1-2 times your salary and usually ends when you leave the job.
Disability insurance protects your paycheck
If an illness or injury kept you from working, how long could you pay the bills? Long-term disability insurance replaces part of your income - often around 60% - and many employers offer it cheaply or free. Check your benefits. Social Security disability exists, but its rules are strict and most applicants are initially turned down.
What You Need - and What You Can Skip
A general picture. Your situation - kids, a home, a car loan, savings - changes the answer.
| Type | Who needs it | What it covers | Where to get it |
|---|---|---|---|
| Most people | |||
| Health | Everyone | Doctor visits, hospital stays, prescriptions; caps what you pay in a year | Employer, HealthCare.gov or your state's marketplace, Medicaid, a parent's plan until 26 |
| Auto | Anyone who drives | Damage and injuries you cause (liability); your own car if you add collision/comprehensive | Insurers directly or through an agent - compare several quotes |
| Renters / homeowners | Anyone who rents or owns | Your belongings, liability, and (for owners) the house itself | Often the same company as your auto policy - bundling can lower both |
| Long-term disability | Anyone who relies on a paycheck | Part of your income if you can't work for months or years | Employer benefits first; individual policies if work doesn't offer it |
| Depends on your situation | |||
| Term life | People with a partner, kids, or others who depend on their income | A lump sum to your beneficiaries if you die during the term | Life insurers or brokers; work coverage as a supplement |
| Umbrella | People with significant savings or a home worth protecting from a lawsuit | Extra liability on top of your auto and home policies | Usually your auto/home insurer |
| Flood / earthquake | Owners and renters in risk areas | Damage standard home and renters policies exclude | Flood: the National Flood Insurance Program or private insurers |
| Often not worth it | |||
| Extended warranties | Electronics and appliance plans at checkout usually cost more than the repairs they'd cover. An emergency fund does the same job. | ||
| Mortgage or credit life | Pays off one specific loan if you die. A term life policy is usually cheaper and lets your family decide how to use the money. | ||
| Whole life as an investment | High fees and slow cash-value growth. For most people, term life plus investing the difference in a 401(k) or IRA leaves more money. | ||
Key Terms
The words that show up on every policy and quote.
What you pay
- Premium
- What you pay to keep the policy, monthly or yearly, whether or not you use it.
- Deductible
- What you pay on a claim before insurance starts paying. Higher deductible, lower premium.
- Copay and coinsurance
- Your share of health costs after the deductible: a flat fee (copay) or a percentage (coinsurance).
- Out-of-pocket maximum
- The most you'd pay for covered health care in a year. After that, the plan pays 100%.
The policy
- Liability
- Coverage for harm you cause to other people or their property.
- Exclusion
- Something the policy specifically doesn't cover, like floods on most home policies.
- Rider
- An add-on that changes or extends a policy, usually for an extra cost.
- Elimination period
- For disability insurance, how long you must be unable to work before benefits start - often 90 days for long-term plans.
Life insurance
- Term life
- Covers you for a set period, like 20 years. If you outlive it, it simply ends. The cheapest coverage per dollar.
- Whole (permanent) life
- Lasts your whole life and builds cash value, but costs far more than term for the same payout.
- Beneficiary
- Who gets the payout. It usually overrides your will, so keep it up to date after a marriage, divorce, or new child.
Life Insurance Needs Calculator
How much coverage would your family need if your income stopped? Add up what they'd have to pay for, subtract what's already there.
Simplified: multiplies income by years, which in effect assumes the payout earns about as much as inflation takes away. It ignores Social Security survivor benefits and a partner's own income, which could lower the need. Defaults are examples - replace them with your own. Get real quotes before buying; prices depend on your age and health. Results update as you type.
Insurance protects what you've built. Next, protect it from people trying to take it - the Scams & Fraud page covers the most common schemes and what to do if one reaches you.