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Medical expenses can get very large very quickly, especially if you get sick, are in an accident, or have an ongoing health issue. In fact, medical bills are one of the leading reasons why people go into debt and file for bankruptcy.

One way to help protect both your health and your financial well-being is to purchase health insurance.

While these plans also have costs associated with them — in the form of premiums, deductibles, copays, and other fees — buying coverage can often be worth the investment.

Finding the right plan for your needs and budget, however, can sometimes be daunting. And, if you’re shopping for health insurance for the first time, it may seem like these companies are speaking an entirely different language.

Fortunately, we’re here to help guide you through all the health insurance basics you need to know when shopping for insurance plans, whether it’s through the federal marketplace, an employer, or directly through an insurance company.

What Does Health Insurance Cover?

The Affordable Care Act (ACA), also known as Obamacare, made covering certain health care services a requirement for all health insurance plans available to consumers.

These required services are known as the 10 health essential benefits. These 10 categories of services include:

•  Ambulatory patient services (outpatient care that you can receive without being admitted to a hospital)
•  Emergency services
•  Hospitalization for surgery, overnight stays, and other conditions
•  Pregnancy, maternity, and newborn care
•  Mental health and substance use disorder services
•  Prescription drugs
•  Rehabilitative and habilitative services and devices (treatment and devices that help people gain mental and physical skills after an injury or chronic condition)
•  Laboratory services
•  Preventive and wellness services
•  Pediatric services, including dental and vision coverage for children

Different Types of Private Health Insurance

Unless you qualify for insurance administered by federal or state governments such as Medicaid, Medicare, and the Children’s Health Insurance Program (CHIP), you will be in the market for private health insurance, which refers to any health care plan offered by a health insurance company.

These options typically include:

Employer-Sponsored Insurance

Also sometimes referred to as “group insurance,” employer-provided health insurance plans are private plans purchased and managed by your employer.

Employer-sponsored plans need to follow the same rules as other private insurance plans and cover the 10 essential benefits listed above.

Because employer-sponsored health insurance covers a large group of people, premiums are generally more affordable than a comparable individual plan. Plus, in many cases, employers cover a portion of your premium costs, which can make this option even more affordable.

Recommended: Choosing an Individual Health Insurance Plan

Exchange-Based Insurance

While federal and state governments oversee the ACA exchanges, the insurance is offered through private health insurance companies. As a result, exchange-based coverage is considered private insurance.

Depending on your income, however, you may qualify for premium assistance through your state or the federal government when you purchase insurance through an exchange.

Exchanged-based insurance is divided into four metal tiers: bronze, silver, gold, and platinum. The tiers do not necessarily reflect quality of service in the plans, but rather how much you’ll pay in premiums and other out-of-pocket costs.

With bronze plans, for instance, you’ll typically pay higher deductibles and copays but lower premiums. Platinum plans generally charge the highest premiums, but you’ll usually pay the least in out-of-pocket costs. Silver and gold tend to land somewhere in between.

Off-Exchange Insurance

This is a health care plan provided by a private insurance company that is sold separate from the exchanges. It may be purchased through an insurance broker or agent or directly from the insurance company.

Off-exchange plans must cover the 10 essential benefits and follow other rules dictated by the ACA — meaning you don’t have to worry about any loopholes or “gotchas.”

With off-exchange insurance, however, there are no government-funded premium subsidies. Also, insurers don’t have to offer a plan at every metal tier. They can offer just one type of health insurance plan.

Short-Term Health Insurance

Short-term plans are designed to provide temporary emergency coverage when you are between health plans or outside of enrollment periods.

Depending on what state you live in, short-term coverage can last up to 12 months, sometimes with the possibility of renewal for up to 36 months.

Short-term plans do not need to be ACA compliant. As a result, these plans do not have to provide essential coverage, most notably, coverage for preexisting conditions. Deductibles and out-of-pocket costs can also be significantly higher than traditional health plans.

Short-term health insurance may still be worth buying to cover a short coverage gap of one or two months if, say, you’re looking for a new job or a new job has a waiting period before your health insurance kicks in. Many large health insurers offer short-term options.

Understanding the Different Types of Plans

Whether you get insurance through your employer, through an exchange, or directly through a health insurance company, you will likely be able to choose between several different types of plans.

You’re also likely to encounter some confusing acronyms while shopping, like HMOs, PPOs, EPOs, or POS plans. Understanding what these letters mean can be important. The kind of plan you choose can have a big impact on your out-of-pocket costs and which doctors you can see.

Here’s a rundown of the various forms of health insurance.

Health Maintenance Organization (HMO)

These plans generally limit coverage to healthcare providers who are under contract with the HMO.

You typically need to have a referral from your primary care doctor to receive care from a specialist or other provider in the HMO network. Care from providers out of the HMO network is generally not covered, except in the case of an emergency.

HMO plans typically have cheaper premiums than other types of private health insurance plans.

Preferred Provider Organization (PPO)

PPOs are typically less restrictive than HMOs when it comes to accessing your network of providers and getting care from outside the plan’s network.

You will likely have the option to choose between an in-network doctor, who you can see at a lower cost, or an out-of-network doctor at a higher cost. Usually, no referrals are necessary to see a specialist.

PPO plans typically have more expensive premiums than HMOs.

Exclusive Provider Organization (EPO)

EPO plans are usually a mix between HMO plans and PPO plans.

EPO plans typically give you the option of seeing a specialist without a referral. However, they generally do not cover out-of-network physicians.

EPO plans tend to have more expensive premiums than HMOs, but may have less expensive premiums than PPOs.

Point of Service (POS)

POS plans are another hybrid of HMO and PPO plans. Plan members typically pay less for care from network providers. Like an HMO, you may need to get a referral from your primary care doctor to see a specialist.

POS plans typically have more expensive premiums than pure HMOs, but may have less expensive premiums than PPOs.

High-Deductible Health Plan (HDHP)

This is a health plan that charges a high deductible (such as $1,650 or more for an individual or $3,300 or more for a family). This is what you would have to pay for health care costs before insurance coverage kicks in.

In return for higher deductibles, these plans usually charge lower premiums.

Often, you can combine an HDHP with a tax-advantaged health savings account (HSA). Money saved in an HSA can be used to pay for qualified medical expenses.

You can deduct HSA contributions from your taxes. Plus, earnings typically grow tax-free in the account, and withdrawals used to pay for healthcare are generally not subject to federal taxes.

Recommended: How Do I Start a Health Savings Account?

Catastrophic

These health plans are typically designed to cover only dire circumstances. They tend to have very high deductibles and lower premiums than other plans.

Catastrophic plans can help if you get seriously ill or injured, but you’ll usually pay a large chunk out of pocket for all other healthcare costs.

Catastrophic plans on the exchanges are only available to people under age 30 and people of any age with a hardship or affordability exception.

Key Features That Determine How Much You Pay

When you shop for a health insurance plan, it’s important to know which features decide how much you’re actually going to pay for health care.

These out-of-pocket expenses can typically be grouped into five major features of your health insurance plan. These include:

Premium: This is the amount of money you pay to your health insurance company each month to stay enrolled in your plan and keep your insurance coverage.
Deductible: This is how much you need to pay for health care services out of pocket before your health insurance kicks in. Your plan may have a family deductible in addition to individual deductibles. You may want to keep in mind that the deductible and out-of-pocket maximum are two different things (more on that below). Plans with lower premiums tend to have higher deductibles.
Copayment: Often shortened to “copay,” this is a fixed amount that you pay for a specific service or prescription medication. Copayments are one of the ways that health insurers will split costs with you after you hit your deductible. You will pay copayments until you hit your maximum out-of-pocket amount.
Coinsurance: This is another way that health insurers will split costs with you. Unlike a copay, coinsurance usually isn’t a fixed cost. It’s typically a percentage of the cost that you pay for covered services. For example, if you have a coinsurance of 20%, you’ll pay 20% of the cost of covered services until you reach your out-of-pocket maximum.
Out-of-pocket maximum: This refers to the most you’d ever have to pay for covered health care services in a year. Payments made towards your deductible, as well as any copayments and coinsurance payments, generally go toward your out-of-pocket limit. Typically, monthly premiums do not count.

How to Buy Health Insurance

If you are employed and your benefits include health insurance, you may be eligible to buy coverage through your employer, either at your date of hire, during open enrollment season, or if you experience certain qualified changes of status such as a marriage or birth of a child.

Another option is to buy insurance through the exchanges at Healthcare.gov. Here, you can also determine if you qualify for a premium subsidy. You may also be given the option of purchasing a plan through your state’s exchange.

You can sign up for exchange coverage during the annual open enrollment period, which typically runs from November 1 through January 15. (Some states have longer enrollment periods.)

Or, you may qualify for a special enrollment period, which allows you to purchase coverage at any time. Loss of employer-based insurance or a move to another state are examples of situations when you might qualify for a special enrollment period.

You can also buy private insurance plans directly from insurance companies. You can research individual and family plans on insurance company websites or work with an insurance broker who specializes in private coverage. Online insurance brokers are also a place to compare plans and prices.

The Takeaway

Health insurance can protect you from large medical bills should you or a member of your family experience an illness or accident. You may be offered health insurance through your employer. Or, you might choose to buy health insurance through the federal health insurance marketplace or directly from a private health insurer.

When looking for a plan that fits your situation and budget, it’s a good idea to review all costs involved. This includes deductibles, copays, and coinsurance, in addition to premiums. You’ll also want to ensure the network of providers and services that each plan covers fit with your health needs. After all, having the right coverage in place can help you maintain your health and preserve your financial security.

When the unexpected happens, it’s good to know you have a plan to protect your loved ones and your finances. SoFi has teamed up with some of the best insurance companies in the industry to provide members with fast, easy, and reliable insurance.

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOPRO-Q325-010

For many, a strategy for estate planning is a must-have at any stage in life. This ensures that your wishes on how to handle your wealth, health, and children are carried out after your demise or a medical emergency that leaves you incapacitated.

Having the proper documents in place makes it easier, faster, and less expensive for your wishes to be executed.

Here are the most common — and important — estate planning documents to know about, create, and routinely update throughout your life.

Typical Estate Planning Documents

Last Will and Testament

The foundation of your estate planning checklist is your last will and testament. This legal document essentially lets you list your instructions on what to do with your assets after you die.

Your will also names an executor, who is the individual you choose to carry out your final wishes. It should be someone you trust who can handle major financial responsibilities, since they’ll be tasked with navigating both your family and financial institutions.

When you make a will, you’ll specify who will take possession of your assets that don’t have a beneficiary assigned. You can also outline your funeral preferences and other final wishes.

If you die without a will, the state takes over and names a representative on your behalf to handle the distribution of your property. The court could name your spouse or close family member to handle the job, or it could choose a public trustee if no one agrees to the job.

The probate process takes a long time, and your family typically won’t be able to access any of your accounts until an executor is named. That’s why it’s best to get started on your estate planning documentation as soon as possible.

Letter of Intent

A letter of intent is another component of an estate plan checklist that allows you to leave an explanation to your loved ones. You can compose an emotional letter if you want, or stick to information that will make the transition easier for your family.

The letter of intent is a good place to list details like your bank accounts, passwords, and other important information your executor or family members may need. For instance, you may have joint accounts with your spouse. But if you’re the one who manages that money or is responsible for certain shared bills, you can explain how to handle those ongoing expenses moving forward.

Also include the physical locations of important documents and assets, like property titles, jewelry, or art.

Recommended: The Difference Between Will and Estate Planning

Beneficiary and Guardianship Designations

Your will documents should include designations for account beneficiaries and, if applicable, a guardianship for any minor children.

Some financial accounts require that you list a beneficiary; others do not. A standard checking account probably doesn’t require you to list a beneficiary, but you can likely volunteer to add one.

IRAs and life insurance generally do require you to add a beneficiary, regardless of the size of your account or policy.

While you do need to fill out the paperwork directly with the financial institution, you can also list your beneficiaries in your will documents to make it easier for your executor to access everything. Be sure to update beneficiaries if major life events occur, like divorce, the death of a spouse, or a birth.

Speaking of babies, you also need to designate a guardian for any dependents. You’ll need to include their names and birthdates and explicitly name the person or persons you wish to be their guardian should you die. If you’re in a two-parent household, the guardianship only goes into effect if both parents die.

Each state has its own way of handling minors if you pass away without naming a guardian. The court will likely pick a close family member to serve in the role, but it’s always better to make the decision on your own — especially if you have tense family dynamics.

Recommended: New Parent’s Guide to Setting Up a Will

Advance Medical Directive

An advance medical directive is a way to clarify your health care wishes in case you become medically incapacitated.

As part of this legal document, you can first name a durable power of attorney for health care. This basically hands over decision making to the person of your choice. It’s best to have conversations before any medical issues arise so they understand how you would prefer to move forward in certain health situations.

You can also include instructions for specific treatments in your advance medical directive. In what is known as a living will, you can list your stance on individual treatments and how your health care professionals should move forward in each scenario. For instance, you may include “do not resuscitate” orders or how you’d like organ donation to be handled (if at all).

Check your state laws on how to correctly instate an advance medical directive or living will. It’s also important to provide copies to your doctor and family members so that they have your wishes on hand.

If you are about to undergo a major medical procedure, you may be prompted to fill out an advance medical directive form before it takes place.

Power of Attorney

Another type of legal document to include in your estate planning checklist is power of attorney. It’s similar to a power of attorney for health care, but with much broader impact.

It lets you choose an individual to make all types of decisions on your behalf if you become incapacitated, including financial and living decisions.

You can opt to give someone general power of attorney, and that person will simply act on your behalf moving forward. Or you can grant someone individual power of attorney, which only lets them act on your behalf during specific situations that you include in the legal document.

A power of attorney becomes dissolved in a few situations. First, it automatically goes away if you die and the other directives of your will (including the executor) go into effect. It also automatically ends if you get divorced and your spouse had power of attorney for you.

Alternatively, if the person with power of attorney dies or becomes incapacitated, then they’ll no longer be able to fulfill their duties. A court can also invalidate the power of attorney document.

Just like any other role you assign in your estate planning documents, picking the right person to have power of attorney can have a major effect on your life. It’s best to choose wisely and have open conversations about your wishes if you could no longer take care of yourself.

Recommended: What Is Estate Planning?

The Takeaway

Estate planning documents dictate a person’s wishes about how to handle their wealth, health, and children upon their incapacitation or demise. Making an estate plan is a good idea as it can minimize the delays, expense, and loss of privacy of the probate process.

When you want to make things easier on your loved ones in the future, SoFi can help. We partnered with Trust & Will, the leading online estate planning platform, to give our members 20% off their trust, will, or guardianship. The forms are fast, secure, and easy to use.

Coverage and pricing is subject to eligibility and underwriting criteria.
Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers- for further details see ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products.
Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, SoFi Technologies, Inc. (SoFi) and SoFi Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under LadderlifeTM policies. SoFi is compensated by Ladder for each issued term life policy.
Ladder offers coverage to people who are between the ages of 20 and 60 as of their nearest birthday. Your current age plus the term length cannot exceed 70 years.
All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOPRO-Q325-008

Starting a family comes with an entirely new set of responsibilities. One of the most important, yet frequently overlooked, necessities is setting up a will. This crucial document outlines tons of important details should you pass away, including what happens to your child.

Estate planning for parents can be broken down into just a few digestible steps. Here’s everything you need to think about, plus tips on how to organize all of your documents.

Estate Planning for New Parents

1. Draft a Will

Some 76% of Americans don’t have a will, according to Caring.com’s 2025 Wills and Estate Planning Study. Fortunately, setting up a will can be simpler than it seems. A will is a document that outlines how you want things handled after you pass away, including distribution of assets and how any minor children to be cared for.

While some people with complex investments and multiple properties may want to hire a lawyer for help, younger, healthy individuals can seek out online services that can walk them through the steps to make a will and sometimes have no initial cost.

Then, you can follow the execution instructions, which typically include signing your will in front of eligible witnesses. Check your state’s individual requirements. Sometimes, you must have your will notarized in order to become valid. Many banks and public libraries offer this service for free.

If you’re married, consider drafting a joint will with your spouse. This gives you the ability to plan for different scenarios, like what happens when one spouse passes away versus both passing away at the same time. Remember to regularly update your will whenever a major life change occurs, like having another child or adding new major assets.


Recommended: Does Everyone Need an Estate Plan?

2. Choose an Executor

When you’re setting up a will, you’ll need to choose an executor. This is the person responsible for handling the legal and logistical aspects of disbursing your assets. They are also responsible for filing any remaining taxes and settling your debts.

Consequently, your executor should be someone you trust and who has the ability to handle the tasks involved. This is especially important when you have young children because the executor’s ability to tie up your finances will impact your kids’ inheritance.

Once you choose an executor, let them know that you’ve chosen them. Give them a quick rundown of what to expect, and also let them know where to find your will and other relevant documents.

3. Name a Guardian

When you start having kids, you also need to name a guardian to care for them if you pass away before they reach legal adulthood. There are a lot of things to consider when making this important decision.

First, think about the potential guardian’s ability to care for children. Are their grandparents too old to take care of them? Does the guardian live far away from other friends and family who could serve as a support system?

Also consider their financial capabilities and their ability to manage any assets you leave to help pay for your kids’ expenses.

Finally, think about your values and who would raise your children in a way that’s similar to your own parenting style. Also realize that your kids will be going through a tough time, so their guardian would ideally be someone whom they trust and would provide emotional comfort.

If you have more than one child, make sure you name a guardian for each one, even if it’s the same person. That means you need to update your will every time you have a new baby. Be as explicit as possible when naming a guardian. For instance, if you pick a sibling and their spouse, name both individuals as coguardians.

Recommended: What Is Estate Planning? A Comprehensive Guide

4. Set Up the Right Accounts

Some types of accounts may help you pass on your assets without having to pay as much in taxes. It’s an important part of the estate planning process and can help you maximize the amount of money you’re able to pass onto your kids. A trust fund can protect the money from being spent too quickly, either by the guardian or your children themselves.

You can implement safeguards as to how much money can be taken out and when. Even if your kids are of legal age, you can put annual withdrawal limits on the trust to prevent a young adult from overspending. Alternatively, even if you pick a guardian to oversee the emotional wellbeing of your children, that same person may not be the best at handling money. Choosing a trust can limit their spending on behalf of your children as well.

There are many different types of trusts, so you may consider consulting an estate planning attorney to choose the best one for your family’s needs.

5. Designate Beneficiaries

The final step of an estate plan is to designate a beneficiary for every account and insurance policy you have. Include bank accounts, retirement and other investment accounts, and life insurance policies.

When choosing beneficiaries, find out how each type of account is taxed for the recipient. Also create a list of all of your account numbers and other pertinent details and include them with your will. This makes it easy for your executor to locate all of your assets. Include debt information as well, like your mortgage and/or auto loan servicer.

You can also update beneficiaries as life changes. For instance, you might initially name your spouse as your life insurance beneficiary. But if they pass away before you, it’s time to update that designation to someone else.

Recommended: How to Buy Life Insurance Coverage

6. Safely Store Your Documents

Once you’ve drafted your will and signed it in accordance with your state’s laws, it’s time to store all of the appropriate estate planning documents to make it easy for your executor and beneficiaries to access.

Lots of documents are now stored online, but you’ll still need to keep your original, signed will in physical form. You can keep it in a fire-proof box at home or in a safety deposit box at your local bank. Be sure your executor knows where and how to access your documents.

7. Outline Access to Financial Accounts

Remember to keep an up-to-date list of all your financial accounts that need to be taken care of. Bank statements should include the account numbers to make it easy for your executor to find. Also include the location of any valuable items, like art or jewelry.

Finally, it’s helpful to include the contact information for any professionals you work with, like an accountant, financial advisor, and estate attorney. Include insurance policy numbers, loan details, credit card numbers, and any other financial accounts that would need to be closed.

The Takeaway

Estate planning for parents isn’t a one-time event. Get started when you have your first child, but also review your intentions and make changes at least once a year. That way, you always have an up-to-date and comprehensive will that reflects your current financials and family structure.

When you want to make things easier on your loved ones in the future, SoFi can help. We partnered with Trust & Will, the leading online estate planning platform, to give our members 20% off their trust, will, or guardianship. The forms are fast, secure, and easy to use.

Coverage and pricing is subject to eligibility and underwriting criteria.
Ladder Insurance Services, LLC (CA license # OK22568; AR license # 3000140372) distributes term life insurance products issued by multiple insurers- for further details see ladderlife.com. All insurance products are governed by the terms set forth in the applicable insurance policy. Each insurer has financial responsibility for its own products.
Ladder, SoFi and SoFi Agency are separate, independent entities and are not responsible for the financial condition, business, or legal obligations of the other, SoFi Technologies, Inc. (SoFi) and SoFi Insurance Agency, LLC (SoFi Agency) do not issue, underwrite insurance or pay claims under LadderlifeTM policies. SoFi is compensated by Ladder for each issued term life policy.
Ladder offers coverage to people who are between the ages of 20 and 60 as of their nearest birthday. Your current age plus the term length cannot exceed 70 years.
All services from Ladder Insurance Services, LLC are their own. Once you reach Ladder, SoFi is not involved and has no control over the products or services involved. The Ladder service is limited to documents and does not provide legal advice. Individual circumstances are unique and using documents provided is not a substitute for obtaining legal advice.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOPRO-Q325-007

These days, you can insure almost anything. Did you know, for example, that Julia Roberts once had insurance for her teeth, and before Daniel Craig filmed a James Bond movie, he insured his entire body? While you probably don’t need to insure any of your body parts for millions of dollars, you might find yourself wondering when you should buy life insurance, or whether renter’s insurance is really necessary.

To help you decide on the right type and amount of coverage, we’ve broken down which kinds of insurance you will most likely need (other than health insurance, of course).

1. Life Insurance

Life insurance is about more than just financing your funeral. It also allows your family to keep paying the bills if something happens to you.

People often think they don’t need life insurance if they don’t have dependents. But if you have debt such as student loans that someone has co-signed, your life insurance can be used to pay off your loans.

It’s common for employers to offer life insurance as part of their benefits package, but the life insurance your employer offers may not be enough, especially if you have dependents. Ideally, your life insurance payout should be enough to invest and yield returns that could replace your income annually. For example, if you assume that you’ll get a 5% return on the money you invest, you would need $1 million in coverage to replace a $50,000 income.

Here’s an overview of some of the most common life insurance options you might consider.

Term Life Insurance

Term life insurance is the simplest and most common form of life insurance. It covers your life for a specific period of time, and pays only if your death occurs during the term. This timeframe is typically anywhere from one to 30 years — the longer the term, the higher the premium. Term life insurance can be more affordable than other types of life insurance.

Whole Life Insurance

Whole life insurance covers you for your entire life. If you make consistent payments toward your policy, you’ll build a cash reserve for your family upon your death.

Universal Life Insurance

In exchange for premiums, universal life insurance can provide coverage for as long as the policyholder is alive, and some policies also accrue cash value. When the policyholder dies, their beneficiaries typically receive a tax-free death benefit in the amount specified by the policy.

Indexed Universal Life Insurance

Indexed universal life insurance (IUL) gives policyholders the option to put money towards either a fixed account or an equity index account. Index accounts with universal life policies often include well-known indexes and can be a good option if you’d like to accumulate tax-deferred cash as well as maintain a set amount of money in a fixed account.

Recommended: Life Insurance Resources: A Comprehensive Guide to Life Insurance

2. Disability Income Insurance

Disability income insurance, also referred to as disability insurance, replaces a portion of your salary if you become disabled. Some employers don’t offer disability insurance, but even if yours does, you may want to consider a supplementary policy to top up the amount that you receive.

Depending on the policy, disability insurance kicks in when you become partially, completely, temporarily, or permanently disabled. There is often a waiting period before benefits start, which could range from one month to a year, depending on your policy and whether you have short-term or long-term disability insurance. The longer the waiting period on your policy, the cheaper your premiums often are.

If you have to take a job that pays less because of a disability, some policies may pay you part of the difference.

Note that disability insurance is expensive, often between 1% and 3% of your salary, and many organizations offer it as a benefit. If you’re evaluating offers between two employers, it’s worth factoring in how valuable this type of insurance is to you.

3. Long-Term Care Insurance

If you’re considering a nursing home, day care, home health aide, or other type of long-term care, be prepared to pay. A 2024 Genworth survey found that the average price of a private room in a nursing home is around $10,645 a month. A typical assisted living facility charges around $5,900 a month, while a home health aide runs $6,482 a month.

To ensure you can foot the bill, the American Association for Long-Term Care Insurance recommends buying a policy in your mid-50s to qualify for the best premiums. Benefits kick in when someone isn’t able to take care of everyday activities or suffers from severe cognitive impairments. Policies vary by the specific level of impairment, the type of services provided, and the length of time the covered person lives after becoming impaired.

Depending on your policy, your benefits may not start until up to 90 days after impairment, and some may require that you receive paid care in the meantime.

Recommended: 8 Popular Types of Life Insurance for Any Age

4. Car Insurance

If you own or lease a car, car insurance is a must. But there are different kinds to consider.

Collision and comprehensive insurance will cover damage to your car and can help replace it if it’s been stolen.

Liability insurance covers you if you get sued after causing an accident. There are three maximum liability limits you can get in a car insurance policy: bodily injury per person in a given accident, bodily injury for all injuries in a given accident, and personal property damage in a given accident. Each state requires different insurance minimums by law.

However, you may want higher limits than the minimum. You may be able to save money on collision and comprehensive coverage by getting a higher deductible of $500 or $1,000. If you drive a car that’s worth less than $1,000, you may want to consider dropping collision and comprehensive, though you’ll still need liability.

Recommended: Cheapest Car Insurance Companies

5. Homeowners or Renter’s Insurance

Homeowners insurance covers damages to your home or theft of personal possessions. It also includes liability insurance to cover accidents that happen on your property. However, it excludes things like floods, earthquakes, and the (hopefully unlikely) event of war.

You should have at least enough insurance to cover the replacement value of your home and possessions. This usually means getting guaranteed (or extended) replacement cost coverage. That’s different from actual cash value coverage, which covers you for the current value of your possessions.

Recommended: Homeowners Insurance Resources: A Comprehensive Guide to Homeowners Insurance

If you’re renting instead of buying, renters insurance is similar, but only covers your possessions and personal liability for damages. It’s worth having in case you leave the water on and accidentally flood your kitchen. The minimum deductible for tenant or homeowner’s insurance is usually $500, but according to the Insurance Information Institute, raising the deductible could save you money.

Recommended: Cheapest Renters Insurance Companies: Find Affordable Coverage

One important element for both of these is liability insurance. This helps protect you against lawsuits, and covers things like people slipping and falling on your property. One hundred thousand dollars of liability coverage is a fairly standard amount.

Recommended: How Much Is Homeowners Insurance?

6. Umbrella Liability Coverage

Umbrella coverage is essentially extra liability insurance, and most importantly, it protects you and your assets in the event of a lawsuit. It covers you beyond the limits of your car or home liability coverage. For example, umbrella coverage will protect you from libel, slander and false imprisonment.

Often it is more economical to get an umbrella policy rather than getting excess home or car liability coverage. It’s a good idea to coordinate car, home, and liability coverages. After all, you wouldn’t typically have a $100,000 deductible on your umbrella policy if your car and homeowner’s insurance have $100,000 of coverage.

The first $1 million in umbrella coverage typically costs about $150 to $300 a year, which is often less than what most people would pay for additional coverage in that amount. As your income grows and you accumulate assets, you may want to consider raising the limit.

Recommended: The Basics of How Umbrella Insurance Works

The Takeaway

Insurance can offer peace of mind and a degree of financial security. But the type and amount of coverage you need will depend on a number of factors, including your lifestyle, health, budget, and financial goals.

When the unexpected happens, it’s good to know you have a plan to protect your loved ones and your finances. SoFi has teamed up with some of the best insurance companies in the industry to provide members with fast, easy, and reliable insurance.

Photo credit: iStock/urbazon

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Home and Renters Insurance: Insurance not available in all states.
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SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

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Umbrella insurance is a type of insurance policy that extends the personal liability coverage you probably already have through your homeowners or auto insurance. In other words, it’s a policy that helps protect your assets if you ever get sued for a whole lot of money.

Although most people won’t face a multi-million dollar lawsuit in their lifetimes, if you are the unlucky exception, an umbrella policy can help you avoid financial ruin. This is a relatively affordable kind of insurance coverage, too — although there are some additional costs it can require, which we’ll get into below.

Here’s what you need to know about umbrella insurance and how to decide if it’s right for you.

What Is Umbrella Insurance?

Certain types of insurance include liability coverage, which is insurance coverage that protects your finances and assets in case you get sued. You likely already have this kind of coverage, to some extent, through your homeowners or car insurance policy.

An umbrella insurance policy adds additional liability coverage on top of whatever coverages you might already have. That can be a lifesaver if you get sued for an amount of money large enough to exceed your existing liability insurance.

For example, say your auto insurance covers $25,000 in bodily injury liability per person and up to $50,000 in bodily injury liability per accident. It also covers up to $20,000 in property damage liability per accident. In total, you have a total of up to $70,000 per accident in coverage.

If you get into a fender bender, or even a moderately severe collision, that coverage might be sufficient. But say you get into a catastrophic accident that involves several cars and more than two people. That $70,000 isn’t going to be enough to cover multiple totaled vehicles or the medical bills for several hospital stays. If you’re sued for those losses and damages, you could lose your retirement savings, liquid savings and checking accounts, and potentially even your home.

If you have an umbrella insurance policy, it would kick in to cover the overage that your auto insurance policy doesn’t meet. Which is to say: umbrella insurance, as its name suggests, can protect you from a seriously rainy day.

But as with all insurance policies, it’s important to read the fine print.

What Does Umbrella Insurance Cover — or Not?

Although umbrella insurance is specifically meant to extend your existing liability coverages, it’s important to understand that these policies don’t cover everything. (Notably, umbrella insurance does not cover your personal property. It’s all about making sure your assets are covered when other people incur losses and damages.)

Although it’s always important to consult the specifics of the policy you’re considering for the full details, here’s a basic breakdown of what umbrella insurance typically does and does not cover.

What Umbrella Insurance Generally Covers

The good thing about umbrella coverage is that it’s an inclusive policy rather than an exclusive one. That means that instead of listing named perils, the way homeowners insurance does, umbrella insurance covers most liabilities with certain named exceptions.

But again, umbrella insurance is all about protecting you from the financial fallout of a lawsuit. It isn’t about protecting your physical home, car, or person from physical dangers. That’s why you still need homeowners, auto, and health insurance products.

Generally speaking, umbrella insurance covers liabilities related to:

•   Injuries

•   Property damage

•   Lawsuits

•   Other personal liability situations

Additionally, umbrella insurance usually extends to household members beyond you, the policyholder, and the incident doesn’t necessarily have to involve your personal property or vehicle to be eligible for umbrella coverage. Your umbrella policy might also cover you worldwide, with some exceptions. Again, consult your individual plan paperwork or insurance representative for full details.

What Umbrella Insurance Does Not Cover

Umbrella insurance is broad and inclusive, but it doesn’t cover every liability. Notable exceptions include:

•   Injuries sustained by you or your family or damages to your own property

•   Intentional actions that result in losses or damages (for example, if you get into a fight and punch somebody in the face)

•   Actions classified as criminal

•   Liabilities you agreed to assume in a contract you signed

•   Liabilities you incurred in your business or professional life. These require business liability insurance, which is a separate product

•   Liabilities caused by war or armed conflicts

What About Deductibles?

It’s also important to understand that even with umbrella insurance, you might still be responsible for paying a deductible when a claim is filed, whether it’s through the underlying insurance policy or the umbrella policy itself.

For example, imagine someone is injured during a party you throw in your home and they sue you for their medical costs and lost wages. Say your homeowners insurance policy covers up to $100,000 in personal liability, but your guest wins a lawsuit to the tune of $500,000.

If your homeowners insurance deductible is $1,000, you’ll need to pay that amount out of pocket before the homeowners coverage kicks in to pay for $99,000 toward the judgment. Then, your umbrella insurance would pay the additional $400,000, as well as any separate legal expenses related to the court proceedings.

Even if your underlying insurance doesn’t have a deductible, or if you use your umbrella policy to pay for a liability that other insurance policies don’t cover, you’d probably still be responsible for some of the cost. You’d likely be asked to pay a self-insured retention before the umbrella policy kicked in to cover the rest of the claim.

How Much Does Umbrella Insurance Cost?

Umbrella insurance is a relatively affordable policy, which makes it an attractive option for those seeking peace of mind in a “lawsuit happy” world. A $1 million umbrella policy costs about $150 to $300 per year, according to the Insurance Information Institute, and you can purchase even more insurance coverage than that for less than $100 per million.

That said, because their products kick in after regular insurance is used, most umbrella insurers will require you to carry a decent amount of coverage already through your baseline policies. You’ll likely need to buy a minimum of $250,000 in liability insurance on your auto policy and $300,000 in liability insurance on your homeowners policy in order to qualify, which means you’ll probably be spending more on insurance overall.

Is It Worth Having Umbrella Insurance?

Learning how umbrella policies work is one thing. But how do you decide whether or not you need this coverage?

At the end of the day, as with so many financial matters, it comes down to your personal choice and level of risk tolerance. After all, anyone can get sued. That said, there are some people who are at higher risk of getting sued than others.

For example, if you regularly have large, raucous gatherings on property you own, you run a decent risk of someone getting injured, which could result in serious medical bills. Ditto if your home has a trampoline or pool. If you’re the owner of a dog or the parent of a teenage driver, you might consider umbrella insurance in case of accidental damages. Celebrities and public figures also often take out umbrella policies.

The Takeaway

Umbrella insurance is an extended liability insurance product that can help protect you in case of a lawsuit. Depending on how likely you are to be sued and your level of risk aversion, you may want to add umbrella insurance to your list of coverages. It’s important to remember, however, that umbrella insurance doesn’t cover all contingencies. And whether or not you take out an umbrella insurance policy, you need basic insurance products like homeowners, auto, and renters insurance.

When the unexpected happens, it’s good to know you have a plan to protect your loved ones and your finances. SoFi has teamed up with some of the best insurance companies in the industry to provide members with fast, easy, and reliable insurance.

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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