Must Read: Types of Insurance you should have.

Must Read: Types of Insurance you should have.

Source: Nexus Insurance Brokers

Homeowners insurance: If you own a house, your bank will require you to have homeowners insurance. In fact, "if someone loses their homeowners insurance for some reason – cancellation, nonpayment, nonrenewal, then the bank is notified," says Daniel J., an insurance consultant in Seattle.

 "They will immediately place their own insurance in it and bill the homeowner. Then they will give the homeowner a chance to get their own. The bank will not allow it to go uninsured for any length of time.”

Unless you've paid off your mortgage, there's really no way out of homeowners insurance.

Replacing your home is an expensive proposition. Having the right homeowners insurance can make the process less difficult. When shopping for a policy, look for one that covers replacement of the structure and the contents in addition to the cost of living somewhere else while your home is repaired.

Keep in mind that the cost of rebuilding doesn't need to include the cost of the land, since you already own it. Depending on the age of your home, and the amenities that it contains, the cost to replace it could be more or less than the price you paid for it. To get an accurate estimate, find out how much local builders charge per square foot and multiply that number by the amount of space you will need to replace. Don't forget to factor in the cost of upgrades and special features. Also, be sure the policy provides adequate coverage for the cost of any liability for injuries that might occur on your property.

Auto Insurance: If you don't drive or don't own a vehicle, you can skip this one, but if you do, you should absolutely have at least the minimum required auto insurance coverage for your state. Ideally, you'd have more, since some states only require you carry enough coverage to insure against the damage of another vehicle or injury or death of another person should you be at fault in an accident—they may not require you have enough to repair your own damage, or to cover against other incidents, fender benders, rental cars, or other problems. Find out what the minimum is in your state or region, then compare that to your current level of coverage. You don't wait until an accident to find out what your policy does and doesn't cover.

Auto Insurance: If you don't drive or don't own a vehicle, you can skip this one, but if you do, you should absolutely have at least the minimum required auto insurance coverage for your state. Ideally, you'd have more, since some states only require you carry enough coverage to insure against the damage of another vehicle or injury or death of another person should you be at fault in an accident—they may not require you have enough to repair your own damage, or to cover against other incidents, fender benders, rental cars, or other problems. Find out what the minimum is in your state or region, then compare that to your current level of coverage. You don't wait until an accident to find out what your policy does and doesn't cover.

Life insurance: Life insurance protects the people that are financially dependent on you. If your parents, spouse, children or other loved ones would face financial hardship if you died, life insurance should be high on your list of required insurance policies. Think about how much you earn each year (and the number of years you plan to remain employed), and purchase a policy that will replace that income in the event of your untimely demise. Factor in the cost of burial, too, as the unexpected cost is a burden for many families.

Various personal finance experts have pointed out that life insurance is perhaps incorrectly named. It is not insurance on your life per se but rather, insurance on your income. If you have dependents, such as a spouse or children or even your elderly parents, who rely on your income, life insurance is a necessity. What a life insurance policy will do is guarantee to these parties a set amount of income for some stated period of time in the event that you die. There are two main forms of life insurance: term and what is known as “whole” life. Very simply, term insurance is plain vanilla insurance. You pay a set premium for a set cash benefit paid out under very specific circumstances. Term is virtually always the correct choice. Whole life attempts to turn life insurance into a savings and investment vehicle which has a very spotty track record of success.

Health Insurance: Contrary to general assumptions, health insurance was not always a must-have in America. As recently as fifty years ago, it was quite common to be uninsured for all but the most catastrophic medical expenses. But times have changed, and some form of health insurance is in many respects a necessity today. As the costs of everything from doctors visits to prescription drugs has steadily risen, it is increasingly difficult for people to pay most medical expenses out of pocket. The most common solution is usually a policy offered through your employer. However, there are other ways of becoming insured, including buying an individual policy (though this is often pricey), buying insurance as part of a group, or using a Health Savings Account to buy a high-deductible policy that covers only major issues like extended hospital stays or surgeries. The older and/or less healthy you are, the more important it is to be insured.

The soaring cost of medical care is reason enough to make health insurance a necessity. Even a simple visit to the family doctor can result in a hefty bill. More serious injuries, that result in a hospital stay, can generate a bill that tops the price of a one-week stay at a luxury resort. Injuries that require surgery can quickly rack up five-figure costs. Although the ever-increasing cost of health insurance is a financial burden, for just about everyone, the potential cost of not having coverage is much higher.

Supplemental Insurance: Supplemental insurance is extra or additional insurance that you can purchase to help you pay for services and out-of-pocket expenses that your regular insurance does not cover.Some supplemental insurance plans will pay for out-of-pocket medical expenses, such as deductibles, copayments, and coinsurance. Other supplemental plans may provide you with a cash benefit paid out over a period of time or given to you in one lump sum.The cash can be used to cover lost wages, transportation related to your health condition, or used to pay for food, medication, and other unexpected expenses you have due to an illness or injury.

It is not a replacement for regular health insurance!