The Three Most Common Insurance Policies

From tiny to grandiose life’s little surprises are wonderful! That is of course unless they involve insurance. Chances are, if a little surprise involves insurance it is also going to involve stress and strain, and if you do not have the right coverage then serious financial hardship. There are a few ways to ensure that you do not experience the latter. The most common way is to be certain that you not only have insurance, but you have the correct insurance.

There are a multitude of different genres of insurance that someone can have. They will range from auto insurance to life insurance to renters insurance; and everywhere in between. Figuratively, there are approximately 8 to 10 different genres of insurance that a person can hold on themselves, their homes or residences, and their vehicles. This article is going to focus on the three most popular genres; health insurance, residential insurance, and auto insurance. Remember, that all of the following information may vary depending on the state that you reside in. So, be certain to verify your state requirements to avoid any and all confusion.

Health Insurance

Obtaining health insurance can be very tricky and confusing at the same time. Right now in America medical bills are staggering. According to KFF’s research on medical debt, tens of millions of American adults carry medical debt, and unpaid hospital bills remain one of the leading drivers of personal bankruptcy filings. Quite often individuals delay going to the hospital simply because they cannot afford it. This absolutely should not be happening and it is one of the main reasons why health insurance is becoming more obtainable through your employer. If your employer does offer health insurance, consider obtaining a policy with a high deductible. When you obtain a policy with a high deductible — formally known as a High-Deductible Health Plan (HDHP) — you are ensuring that your monthly health insurance cost will be lower even if you have to pay a higher deductible before the coverage starts. The Healthcare.gov glossary defines a qualifying HDHP in 2025 as one with a minimum deductible of $1,650 for self-only coverage.

Investigating a Health Savings Account (HSA) can also be beneficial. This allows you to put away tax-free dollars that can be isolated for any future medical needs. An HSA can also be combined with a high-deductible insurance plan; simultaneously saving you money in the long run. The IRS sets annual HSA contribution limits, which for 2025 stand at $4,150 for individuals and $8,300 for families — amounts that are adjusted annually for inflation. Many large financial institutions such as Fidelity Investments and major banks administer HSA accounts, making them broadly accessible to employed Americans.

When considering health insurance it is important to know when the enrollment dates are. Typically enrollment dates are the last two months of the calendar year. However, this is truly dependent on the state that you live in and oftentimes the company that you work for. The federal Open Enrollment Period for ACA Marketplace plans generally runs from November 1 through January 15 in most states, though state-run exchanges like Covered California and NY State of Health maintain their own schedules. There will always be exceptions to the rule as far as updating or altering your insurance. The top three exceptions are generally marriage, childbirth, or death — events that trigger what the Centers for Medicare and Medicaid Services (CMS) classifies as a Special Enrollment Period (SEP).

Residential Insurance

Homeowner insurance is not mandated within any state. It is highly recommended. By owning your home or being under a mortgage or contract you are obligated for any repairs or replacements if there is damage or destruction to your home. That obligation is lightened tremendously by having homeowner insurance. Quite often lenders will require a homeowner to purchase insurance just to alleviate the worry of a homeowner walking away from a mortgage if there is a catastrophe. The Consumer Financial Protection Bureau (CFPB) confirms that nearly all conventional mortgage lenders — including those backed by Fannie Mae and Freddie Mac — contractually require borrowers to maintain homeowners insurance for the life of the loan.

There are multiple different types of policies that are written into a person’s homeowners insurance. These are often referred to as being “blanketed” under one main policy. They can include dwelling coverage; which ultimately covers the structural integrity of the home. There is also personal property coverage; which covers your personal belongings that are inside the home. Lastly, and most commonly, is liability coverage; which will pay for any injuries or damage that the homeowner has accidentally caused to someone else. The Insurance Information Institute (III) notes that a standard HO-3 policy — the most widely purchased homeowners form in the United States — bundles all three of these coverages together and also includes additional living expenses (ALE) coverage if your home becomes temporarily uninhabitable.

One important point to remember is that basic residential insurance does not cover damage that is caused by a flood or an earthquake. These are considered natural disasters. However, many insurance companies offer a separate policy in order to cover these natural disasters. You just have to know to ask about them. Flood coverage is available through private insurers as well as through the federal government’s National Flood Insurance Program (NFIP), administered by FEMA, which provides policies to homeowners in participating communities. Earthquake coverage is typically offered as a separate endorsement or standalone policy, and in high-risk states like California the California Earthquake Authority (CEA) provides publicly managed earthquake insurance options.

Auto Insurance

Not obtaining and maintaining auto insurance is illegal in nearly every state within the United States. There are multiple consequences for driving without insurance. Not only can it be financially draining, but it can also negatively affect your legal ability to continue to drive if you are at fault for any type of vehicular accident and are found to have no auto insurance. The National Association of Insurance Commissioners (NAIC) provides a comprehensive state-by-state guide to minimum auto insurance requirements, which vary significantly — for example, California requires minimum liability limits of $15,000/$30,000/$5,000 while states like New York mandate higher minimums. There are several different types of auto insurance that you can obtain to ensure you are meeting at least the bare minimum that is required within your state.

One of the most common auto insurance policies is liability coverage. Liability coverage pays for the damage to property or injury to another person that is proven to be your fault. One of the more crucial benefits of liability coverage is the fact that it also pays for your legal counsel if there are judgments or settlements set against you after being sued for an accident. According to III auto insurance data, the average auto liability claim for bodily injury reached $24,211 in a recent policy year, underscoring why state minimum limits are often insufficient for full financial protection.

Having uninsured or underinsured motorist coverage on your vehicle is beneficial in multiple ways. This helps cover you, your passengers, and your vehicle if someone comes in contact with your vehicle and they do not have insurance coverage. This addition to an auto insurance policy can also be leveraged to help pay for lost wages while you are recuperating and unable to work. The Insurance Information Institute estimates that roughly 1 in 7 drivers on American roads is uninsured, making uninsured motorist (UM) and underinsured motorist (UIM) coverage a particularly valuable addition to any policy. Many major auto insurers — including State Farm, Geico, Progressive, and Allstate — offer UM/UIM coverage as an optional or, in some states, mandatory add-on to standard policies.

This article is merely covering three of the most common insurance policies that you should really investigate and implement. Not only to suffice your state law requirements but to ensure that you and your loved ones are covered under any and all circumstances. When a tragedy occurs you want to focus your time and energy in the right direction. Allow your specified agents to handle the insurance needs and you focus on the well-being of yourself and your loved ones.

Frequently Asked Questions

What are the three most common types of insurance policies in the United States?

The three most common insurance policies are health insurance, homeowners (residential) insurance, and auto insurance. These three cover the most fundamental financial risks Americans face — medical costs, property loss, and vehicle-related liability — and are either legally required or strongly incentivized by lenders and employers.

Is health insurance required by law in 2026?

At the federal level, there is no longer a financial penalty for being uninsured — the ACA’s individual mandate penalty was reduced to $0 by Congress beginning in 2019. However, several states including California, Massachusetts, New Jersey, Rhode Island, and Washington D.C. impose their own state-level penalties for going without minimum essential coverage. Always verify your specific state’s requirements with your state insurance commissioner’s office.

What does a standard homeowners insurance policy cover?

A standard HO-3 homeowners policy typically covers dwelling (the structure of your home), other structures (detached garages, fences), personal property (furniture, electronics, clothing), liability (if someone is injured on your property), and additional living expenses if your home is temporarily uninhabitable. It does not cover flood or earthquake damage — those require separate policies purchased through programs like FEMA’s National Flood Insurance Program (NFIP) or private carriers.

What is the minimum auto insurance required by law?

Minimum auto insurance requirements vary by state but almost universally include bodily injury liability and property damage liability coverage. For example, California requires at least $15,000 per person / $30,000 per accident for bodily injury and $5,000 for property damage. New York requires $25,000 / $50,000 / $10,000. The NAIC publishes a state-by-state breakdown of all minimum requirements. Driving without meeting your state’s minimum is illegal and can result in fines, license suspension, and vehicle impoundment.

What is a Health Savings Account (HSA) and who qualifies?

An HSA is a tax-advantaged savings account that lets you set aside pre-tax dollars for qualified medical expenses. To qualify, you must be enrolled in a High-Deductible Health Plan (HDHP) as defined by the IRS, not be enrolled in Medicare, and not be claimed as a dependent on someone else’s tax return. For 2025, the contribution limit is $4,150 for individuals and $8,300 for families. Funds roll over year to year and can be invested, making HSAs a powerful long-term medical savings tool.

Does auto insurance cover uninsured drivers hitting my vehicle?

Standard liability-only auto insurance does not cover damage to your own vehicle caused by an uninsured driver. You would need to add uninsured motorist property damage (UMPD) coverage or carry comprehensive and collision coverage to protect your own vehicle. Uninsured motorist bodily injury (UMBI) coverage separately pays for your medical expenses and lost wages if you are injured by an uninsured driver. Approximately 1 in 7 drivers in the U.S. is uninsured, according to the Insurance Information Institute.

What triggers a Special Enrollment Period (SEP) for health insurance?

A Special Enrollment Period allows you to sign up for or change health insurance outside of the standard Open Enrollment window. Qualifying life events recognized by the Centers for Medicare and Medicaid Services (CMS) include marriage, divorce, birth or adoption of a child, death of a dependent, loss of other health coverage (such as losing a job), and moving to a new coverage area. Most SEPs give you a 60-day window from the qualifying event to make changes to your coverage.

Is homeowners insurance legally required?

No state legally mandates homeowners insurance. However, if you have a mortgage, your lender — whether that is a bank, credit union, or a loan backed by Fannie Mae, Freddie Mac, or the FHA — will contractually require you to maintain a homeowners policy for the duration of the loan. If you allow your policy to lapse, your lender may purchase force-placed insurance on your behalf, which is typically far more expensive and offers less coverage than a standard policy.

What is the difference between liability and full coverage auto insurance?

Liability insurance covers damage and injuries you cause to other people and their property — it does not pay to repair your own vehicle. Full coverage is not a single policy type but rather a combination of liability, collision (covers your vehicle in an at-fault accident), and comprehensive (covers theft, weather damage, animal strikes, and other non-collision events) coverage. Full coverage typically costs an average of $2,150 per year nationally compared to approximately $644 per year for liability-only coverage, according to NerdWallet’s 2025 data.

How do I know if I have enough homeowners insurance coverage?

The key metric to check is whether your dwelling coverage equals your home’s replacement cost value — the amount it would cost to rebuild the structure from scratch using current labor and material prices — not its market value. Many homeowners are underinsured because replacement costs have risen sharply since 2020. You can request a replacement cost estimator from your insurer or an independent appraiser. The CFPB and III both recommend reviewing your coverage limits annually and after any major renovations.