Once young adults finish school and begin to establish independent lives, they need to start thinking more about insurance. Prior to adulthood, individuals may have encountered the need for car insurance, but for many, financial responsibility requires several other types of insurance to protect assets. Below is a brief guide to the types of insurance that individuals definitely need, may need, and probably do not need.

The Most Necessary Forms of Insurance

Auto Insurance

As previously noted, automobile insurance is the most common form of must-have insurance. Driving without insurance is against the law in virtually all jurisdictions. People caught driving without the minimum amount of insurance may face jail time, large fines, and suspensions of their driver’s licenses.

The amount of insurance necessary is often dictated by any lienholders for a vehicle. People who own their cars outright need to decide between liability insurance, which covers damage to other drivers, and full coverage, which covers all damage.

Health Insurance

The other type of absolutely necessary insurance is health insurance. Today, not having health insurance in the United States is punishable by fine, and recent changes have made insurance more accessible than ever before.

While people are students, they can be covered under their parents’ insurance until they are 25, but at that point they need to obtain their own coverage. Health insurance is often provided through employers, but people who are self-employed will need to find their own coverage, whether through Healthcare.gov or another source.

Homeowners or Renters Insurance

Most people also need homeowners or renters insurance. If people have a mortgage, their bank will require homeowners insurance, and many landlords require renters insurance. This coverage protects the real estate investments that people have made.

In reality, homeowners have no way out of homeowners insurance until they own their homes outright, and at that point, they should continue to maintain a policy to protect the property against disaster. Renters insurance is often not as necessary, but it can help protect the value of one’s personal property, particularly for those who live in areas with high crime rates.

Forms of Insurance that Some People May Need

Life Insurance

Once people get married and/or have children, they often begin to think of life insurance as a necessity. Sometimes employers provide this type of coverage, but if not it is something that could become important for those who have financial dependents. If your death would create financial hardship on others for any reason, life insurance should be considered necessary.

Even people who are not married and who do not have children may want to consider life insurance in certain circumstances. For example, if someone’s parent or friend cosigned on a student loan, that person would become responsible for the debt upon death, and life insurance can help cover this cost.

Disability Insurance

Some people may need disability insurance, which replaces income if someone becomes unable to work during normal working years. This type of insurance is similar to life insurance, but provides further protection for income. This benefit could prove necessary if only one person in a household has an income, or if the income of one person is significantly higher than that of the other workers in the family.

Umbrella Insurance

Another form of insurance that people may want to consider is called umbrella insurance. In a sense, this coverage is insurance for insurance. Umbrella coverage provides extra liability coverage in case personal and/or auto liabilities become exhausted.

People who feel like they have a lot to lose or who worry about lawsuits may benefit from the extra peace of mind provided by umbrella insurance. Professionals recommend that people take into account the value of their assets and compare it to their total insurance coverage from other sources. If the value of their assets is greater, umbrella insurance is a wise idea.

Forms of Insurance That Are Generally Unnecessary

While it is perhaps strange to say that any type of insurance is unnecessary, some forms simply duplicate coverage that people already have. Some people may be required to purchase private mortgage insurance until their loan balance reaches a certain point, but most other types of insurance only make money for insurers.

For example, credit card insurance exists that would pay off credit accounts, but this type of coverage is generally already provided by disability and life insurance. Credit card insurance helps cover payments when people struggle financially, but the insurance does not pay the whole balance, only the minimum monthly payment, and some people have reported issues with actually getting these payments made.

Some people may also think that credit card fraud insurance is a good investment, but the odds of having to pay back thousands of dollars in fraudulent purchases are very low. Maximum liability in virtually all cases is limited to $50, so this type of insurance is simply overkill.

Another form of insurance that some people consider is life insurance for a child. The thought process behind this is that, in the event of the unthinkable, at least some money for a funeral will be available. However, this money is much more wisely placed in a college savings account. Parents should look forward to the future rather than planning for something unlikely, especially considering the rising costs of college.