9 Categories of Insurance | StateCE

Insurance isn’t a static thing. It’s always changing, and the rules and regulations for insurance agents are always evolving as well. There are a number of different categories of insurance, each of which covers a different area of a person’s or business’ life. Whether you are an agent who is just starting your career or a current agent looking to add a specialty, knowing the types of insurance certifications and categories can help you see which area is best for you.

Life Insurance

According to the 2016 Insurance Barometer Study, around 60 percent of Americans between the ages of 18 and 75 reported having a life insurance policy. The study also found that people are becoming more and more receptive to the idea of life insurance. Around 66 percent of people surveyed said that they were at least somewhat likely to recommend life insurance to a friend.

In the simplest of terms, life insurance is protection in case the insured person should die prematurely. Not everyone needs to have a life insurance policy, but anyone who has a spouse, children, or others who depend on him or her for support should have one.

Essentially, purchasing a life insurance policy allows a person to put a plan in place in case the unexpected should happen. A life insurance policy is meant to provide financial support to a person’s dependents, so that they can continue to live in the style and manner they were used to before the policyholder passed on.

You can divide life insurance into two main categories: term and whole (also known as permanent). Around 6.4 million term life insurance policies were purchased in 2003. Around 7.1 million whole life policies were purchased that same year.

A term life insurance policy is good for a set length of time, or term, usually around 30 years. In contrast, a whole or permanent life insurance policy is in place for as long as a person lives and continues to pay the premiums.

There are two main types of term life insurance policies. Level term policies have the same benefit in place for each year of the policy. If a person purchases a policy with a $1 million benefit in year one, it will have a $1 million benefit in the last year. The benefit is gradually reduced over the life of the policy when a person purchases a decreasing term policy. A policy that had a $1 million benefit in the first year might have a $500,000 benefit by the end of the last year of the policy.

Whole life insurance policies also come in a few different varieties. A person can purchase a traditional whole life insurance policy, a universal life insurance policy, or a variable life insurance policy. A traditional whole life insurance policy has the same premium payment throughout the life of the policy and will pay the same benefit whether a person dies after 10 years or after 45 years. Many traditional whole life policies also have an attached savings account that receives dividends through the life of the policy.

A universal life insurance policy can be a bit more complicated. Like a traditional policy, it has a savings account attached to it. The owner of the policy has the option of using money from the attached savings account to cover the cost of premiums at some point during the life of the policy. The owner can also decide to increase the amount of the death benefit if the insured is able to pass a medical exam.

The third type of whole life insurance policy is a variable policy. While universal and traditional policies are attached to a savings account, variable policies are attached to more volatile products, such as stocks and mutual funds. The amount of the death benefit can increase substantially if the market does well. But there’s also the risk that the benefit will drop during times when the market is performing poorly.

Usually, term life insurance policies are the least expensive option because a person usually has one in place when the risk for death is low. A 35-year-old who purchases a 30-year term life policy to protect his or her family is much less likely to die than a 75-year-old with a whole life insurance policy in place.

Becoming a licensed life insurance agent can be a good option for you if you want to help people plan for their future and figure out ways to protect their personal and business interests.

Health Insurance

While life insurance helps provide for people financially in case the main breadwinner of a family dies, health insurance helps cover the cost of any healthcare a person might need. Health insurance is a broad category, as there are many different policies available. In the US, people are required to purchase a health insurance policy, or else pay a fine. As of 2017, the fine is 2.5 percent of a person’s income or $695, whichever amount is more.

Since there are so many different health insurance options, there are many opportunities for insurance agents who wish to offer healthcare plans or specialize in health insurance. Some can work on the private market, selling insurance policies to individuals. Others can work with government insurance policies, such as Medicaid or Medicare. Some work with employers and put together group insurance policies that cover a large number of people.

Like life insurance, there are several different types of health insurance policies available. A health management organization (HMO) policy requires the insured to choose a primary care doctor. If the insured wants to see any specialists and use his or her insurance to cover the cost of care, he or she needs to get a referral from the primary care doctor first.

Usually, the doctors who are part of an HMO have been vetted by the insurance company. They’ve worked with the company to negotiate rates and to verify their credentials. Thanks to the rate negotiation, a doctor working with an HMO might earn less per patient than if he or she charged directly. But working with the HMO usually allows the doctor to see more patients, which many consider to be a fair trade-off.

Another type of health insurance policy is a preferred provider organization (PPO). You don’t need to set a primary care doctor if you have a PPO policy. You’re also free to see specialists without getting a referral. The trade-off is that your insurance company can charge you more if you see a doctor who’s not in its network or might refuse to provide coverage at all for certain doctors.

A health insurance agent helps people determine which health insurance policy best fits their needs and budgets. Depending on the medical conditions they have and their healthcare needs, some people might need to choose a policy that offers a lot of coverage and that charges a higher monthly premium. People with few medical issues can usually pick a policy that has a lower month premium, but that also charges a deductible or that will require more out-of-pocket payments before coverage begins.

Since life and health are often linked, some agents who begin their careers as life insurance agents decide to pursue certification as a health insurance agent at a later date.

Property Insurance

While life and health insurance provide some protection if something goes wrong with a person, property insurance provides protection if something goes wrong with a possession. Property insurance is actually a broad category of insurance. It includes policies such as renter’s insurance, car insurance, homeowner’s insurance, and flood insurance.

Generally, property insurance protects things from damage or theft. People who live in areas that are prone to certain types of natural disasters, such as earthquakes and floods, might need to purchase special property insurance polices to protect their possessions in case those types of disasters occur. The typical property insurance policy will usually not cover earthquakes or floods.

Casualty Insurance

Casualty insurance usually goes hand-in-hand with property insurance. Agents who typically sell one type of property insurance also usually offer casualty insurance as well. While property insurance provides coverage to protect against damage or theft, casualty insurance usually protects the insured from any liabilities related to a property.

For example, if an insured car owner injures another person while driving his or her car, casualty insurance will cover the costs of the injured person’s medical bills. Another example of casualty insurance is worker’s compensation insurance, which will provide benefits to insured business if an employee is injured on the job. Casualty insurance also covers the cost of damage to other people’s property.

Homeowners Insurance

Homeowners insurance policies are a combination of property and casualty insurance. The policy provides protection to the owner of a home against damage and theft. It also protects the homeowner from liability. For example, if a person slips and falls while visiting a person’s home or if the homeowner’s pet bites a visitor, the homeowner’s policy will cover some or all of the costs of the injured person’s medical bills and can provide protection if that person ends up suing the homeowner.

Most homeowners insurance policies cover a range of events that can cause damage to a home or its contents, such as fire and storm damage. But most policies don’t cover extreme events, such as floods or earthquakes. Additionally, people who own high-value items, such as expensive jewelry or high-priced artworks, will usually have to purchase additional coverage to protect those items.

Homeowners who have a mortgage are required to have an insurance policy in place. If a homeowner’s insurance lapses, the bank that owns the mortgage will usually purchase a policy for him or her and charge the homeowner the premium amount. Although insurance isn’t a requirement once the home is fully paid off, it’s usually a good idea for a homeowner to have it to protect his or her investment.

Auto Insurance

Car or auto insurance offers a driver protection against loss in case of an accident. Auto insurance comes in many forms and most states in the US require drivers to have at least a minimum amount of coverage. How much insurance a driver purchases depends on a number of factors, from the value of the car to whether or not he or she is making payments on a car loan.

Liability insurance provides coverage if a driver is in an accident and injures another person or causes damage to another person’s car or other property. Personal injury protection coverage provides protection against injury, no matter whose fault the accident was. Collison insurance coverage will pay for the cost of repairing the insured’s vehicle after an accident. Comprehensive coverage protects against damages caused by fallen tree branches or natural disasters. Underinsured motorist protection protects drivers who are involved in accidents with people who might have enough car insurance to provide adequate coverage.

The specific rules for car insurance coverage vary from state to state. Auto insurance agents need not only to be sure that they are maintaining their state certification and meeting their state’s continuing education requirements. They also need to be sure that they are providing their clients with adequate amounts of auto insurance.

Annuities

While life insurance offers financial protection in case the insured dies early or unexpectedly, annuities provide financial protection in the event that a person has a long life. An annuity is a type of insurance policy that offers income for a person during retirement.

An annuity can either be immediate or deferred and it can come from a variable or fixed account. A deferred annuity doesn’t begin to make payments to the insured until a specified point in time. A person might open a deferred annuity when he or she is 50 and decide to defer payments until he or she reaches the age of 60. The deferment gives the money in the annuity time to earn interest.

In contrast, an immediate annuity begins to pay out right away. Typically, annuities will provide regular payments to the insured for the rest of his or her life.

The money invested in a variable annuity is invested in stocks and other market-based vehicles. Variable annuities are a bit riskier than fixed annuities, since there is the chance the annuity will lose value. Fixed annuities are usually invested in bonds and other instruments that over a steady interest rate.

Since there are some similarities between life insurance and annuities, agents who offer one usually offer the other.

Long-term Care Insurance

Health insurance covers the cost of healthcare throughout a person’s life, but it doesn’t necessary cover the cost of long-term care, which many people need toward the end of their lives. Long-term care insurance helps pay for the cost of a nurse who visits a person at home or for the cost of living in a nursing home or other facility.

The cost of long-term care insurance premiums vary based on a number of factors, including the age of the insured, how much the policy will cover per day, and how many days of care the policy will cover.

Disability Insurance

When a person is disabled and can no longer earn income or work, disability insurance is meant to provide financial coverage and protection. In the US, workers who have a certain number of years of employment under their belt may be eligible to qualify for payments from Social Security Disability Insurance. But Social Security is usually not enough to cover the full amount of income lost.

Private disability insurance can either be short-term or long-term. A long-term policy can provide income protection for several years or for the rest of a person’s life after a disability. Short-term policies are meant to provide protection after an injury that leaves a person temporarily unable to work. Usually, short-term policies provide coverage for up to two years.

Insurance certification programs online are designed to make it easier for insurance agents to fulfill their state’s continuing education requirements or to meet licensure requirements in the first place. Whether you are looking to complete continuing education on your own schedule or are considering offering your clients a wider range of insurance options, StateCE offers a wide variety of insurance courses. Learn more about your state’s requirements and our courses today.