Conceptually, insurance is pretty simple – you pay a premium each month to be protected against dangers that can upend your financial life, and with that protection comes peace of mind. The most common types of insurance – the bare minimum that most experts agree everyone should have – include health insurance, life insurance, car insurance, and disability insurance.

Insurance helps you to manage risk against your most important assets, like your house, car, and your ability to provide for your family.

Additional insurances can often be a smart addition. For example, in today's litigious environment, having umbrella insurance can be a protection against a frivolous lawsuit. Many people consider short-term disability insurance, but not long-term disability insurance. If you don't own a home, you obviously do not need homeowner's insurance, but should definitely consider having renter's insurance.

Understanding the different types of insurance is necessary in order to be sure you are properly covered. One thing every policy has in common is that you'll be paying premiums for a long time, so making sure you aren't paying for coverage you don't need (or simply overpaying) is just as important.